Small Business Earnings Decrease in Q1 2008
42% of Small Businesses
Indicate Decreased Earnings of 23%, A Study by ICR
Reveals
MEDIA, Pa.--(BUSINESS
WIRE)--A recent study by International
Communications Research (ICR) found that 42% of small businesses saw a
decline in first quarter 2008 earnings by an average of 23% when compared to
the same period last year. The impact has been greater on smaller employers;
nearly four out of five businesses that got hit employ fewer than 20 people.
The challenges were not unique to start-ups only, but impacted long standing
businesses as well.
While close to one in
four small businesses did see their earnings increase by an average of 15%,
more are confronted with tough times. This is despite the many supportive
measures taken by the government.
Over the past seven
years, the government has allowed more than $1.3 trillion worth of tax relief
into law. The recent tax rebates to US households are also aimed at encouraging
consumption to offset any slowdown in earnings. The same Economic Stimulus Act
of 2008 in fact provides incentives for businesses as well, through Section
179, which allows small businesses to write off the full purchase price of
equipment purchases (up to $250,000). The Act further enables first-year bonus
50% depreciation for any over-limit equipment. The combined incentive for small
businesses is for immediate tax relief in 2008, and makes leasing equipment and
investing in business not only feasible, but attractive as well.
The basic math of
economics, and the governments intention, is that investment will lead to
employment, which in turn will lead to economic stability and growth. Yet, the
survey revealed that only 17% of small businesses intend to increase capital
expenditure when compared to 2007. Most of the businesses surveyed either have
no plan to invest or plan to reduce CAPEX.
The problem could be
that small businesses are unaware of the CAPEX incentive. Only one in five
small businesses interviewed had some degree of awareness of the Economic
Stimulus Act of 2008. And, among those aware, fewer than one in ten knew of the
actual maximum deductible limit. Another challenge, that could be more difficult
to address, could be that small businesses may be foreseeing difficult and
risky times ahead, heightening the aversion to any investment.
Small businesses are a
central source of growth for an economy. On average, seventy percent of new
jobs in the US
are created by small businesses, representing more than half of non-farm
private GDP. They also represent an entry point into the economy for new
groups, such as women, youths, ethnic groups and older people, while at the
same time facilitating many part-time employment opportunities.
The study conducted by ICR focused on small
businesses employing fewer than 100 people. This segment represent
approximately one third of the work force in the country.
Methodology
The findings were
obtained through ICRs national monthly small
business omnibus study, SmallBizEXCEL,
conducted in May 2008 among a mix of 504 small businesses across the US. Small
businesses are defined as employing fewer than 100 people. Annual
revenues in 2007 for majority of participating businesses was $5 million
or less. The interviews were conducted from ICRs
phone centers in the US
using Computer Assisted Phone Interviewing methodology.
Interviewing targets for
SmallBizEXCEL,
are based on number of employees, industry/ type of business, and region. The
targets for number of employees are a stratification of the sample across four
employee range groups. The targets for type of business and region are in
proportion to the universe. In the end, the results are balanced by the
mentioned three criteria to reflect the universe of small businesses.
ICR
Based in Media, PA,
ICR is a leading survey-based market research company, which conducts research
in more than 90 countries. ICR offers a full line of custom and omnibus
research services. Its omnibus solutions include small business, teen and
Hispanic research services. ICRs full suite of
custom research services are guided by industry experts and advanced analytics,
with specialization in brand, customer loyalty, product development, market
exploration, and public affairs research. More information on ICR can be
obtained from www.icrsurvey.com.
Contacts
Neil Modi
Financial Services Group
ICR
info-nmodi@icrsurvey.com
Tel: 484-840-4300
