Nearly Two-Thirds of Small Businesses Expect to Grow in the Next Six Months, According to the OPEN Small Business Network Semi-Annual Monitor From American Express

NEW YORK--(BUSINESS WIRE)--Oct. 22, 2002--
One in Four Small Firms Plan to Hire; More than Half of Small Businesses also Plan Near-Term Capital Investments

Despite the challenges posed by the uncertain economy, a majority of small businesses (64%) foresee expansion opportunities for their firms in the next six months, according to the OPEN Small Business Network Semi-Annual Monitor from American Express, (NYSE:AXP).

Many of the companies that anticipate growth also appear to be staffing up for it. Overall, 26% of small businesses say they plan to add workers during the next six months. Among these companies with hiring plans, three-quarters are businesses that expect near-term growth.

The majority of companies with hiring plans (52%) say they are adding workers to help drive business volume increases. Others are hiring in order to staff new business ventures (26%) and because they have finally found the right candidate for a job they have been trying to fill for some time (21%). On average, those companies planning to hire will add three full-time employees to their staff in the next six months. Only 24% of small businesses hiring are recruiting seasonal staff.

"The survey underscores the value small business owners place in their employees, who many see as critical to helping drive business growth," said Kerry Hatch, executive vice president and general manager, OPEN: The Small Business Network from American Express. "The majority of companies planning to hire are doing so to help grow business volume. In addition, small business owners appear less willing to let jobs fall victim to a sluggish economy. In the next six months, nine percent of small businesses say they plan to cut staff or salaries to help manage their businesses through the uncertain economy, down sharply from 26% in March."

Hiring plans vary by region and by the size of the business. The survey found that small businesses in the West (38%), North Central (24%) and the South (24%) were more likely to add staff than small businesses in the Northeast (18%). In addition, larger small businesses were nearly three times more likely than smaller ones to have hiring plans. Among those surveyed, 56% of companies with 20-49 employees and 60% of firms with 50-99 employees reported plans to add staff in the next six months, compared to just 22% of small businesses with fewer than 10 employees.

Expectations for Growth Drive Increase in Planned Capital Investments

The small businesses that anticipate growth in the next six months also appear to be driving an increase in planned capital investments. Overall, 56% of small businesses say they plan to make capital investments in the next six months, up from 49% reported last March. Of these companies planning capital investments, two-thirds expect to grow their businesses in the next six months. Compared to the survey last March, computers and peripherals remain the most common capital investment, followed by office equipment and office furniture.

Overall, business growth was the top priority among small business owners, cited by 42%, and cash flow was the second most important business priority, cited by 18%. The cash flow issues of greatest concern include accounts receivable (18%); the ability to pay bills on time (16%); having enough cash on hand to win new business (15%) and the ability to track cash flow (8%).

To manage cash flow issues that arise, small business owners report they are most likely to put off purchases (23%), obtain and use a line of credit (19%), use a charge or credit card (15%) or take out a short-term loan (10%). Only 3% said they would dip into personal or private funds.

According to the survey, about three-quarters (74%) of small businesses use a credit or charge card for various business expenses, up slightly from March (71%). In addition, many small companies continue using "plastic" in non-traditional spending categories. While nearly half (49%) use a charge or credit card for travel expenses and 38% use them for entertainment expenses; 38% use a card to make purchases from wholesalers; to purchase office supplies (38%); and to purchase computer equipment (31%). In addition, 16% purchase business or professional services on their cards.

Business Decisions Vary by Company Age, Gender and Ethnicity

According to the OPEN Small Business Network Semi-Annual Monitor, small companies that have been in business for five years or less appear to be more aggressively pursuing growth opportunities than older enterprises. Fifty-five percent of these "younger" companies named growth as their top business priority compared to 39% of "older" companies that have been in business for more than five years.

Younger companies are also more likely to be making capital investments in the next six months (62% vs. 54%) and are more likely to be hiring to handle increased business volume (59% vs. 48%) or to staff new ventures (40% vs. 22%). At the same time, however, they are also more likely to have cash flow issues than older companies (68% vs. 61%) and to view the uncertain economy as a barrier to growth (34% vs. 23%).

Compared to the average small business, women-owned businesses are more likely to add staff in the next six months (32% vs. 26%) but are less likely to make capital investments (42% vs. 56%). They are also more likely to cut back on their own personal spending to create additional cash flow flexibility for their business (57% vs. 44%) as a tactic to manage their company through the uncertain economy.

According to the survey, ethnic minority-owned businesses are more likely to add staff in the next six months than women business owners (40% vs. 32%) and small businesses in general (40% vs. 26%). They are also more likely to make capital investments compared to women business owners (68% vs. 42%) and small business overall (68% vs. 56%).

In addition, minority business owners appear to be more focused on cash flow than the average small business owner. Minority business owners were more likely to cite having cash flow issues (71% vs. 63%), and managing cash flow was the top business priority for 24% of minority-owned businesses compared to 18% overall.

Internet Use Grows

Small companies are increasingly using the Internet as a business tool, according to the survey, and Internet use varies widely by ethnicity and gender. Overall, 71% of small businesses report using the Internet, up from 66% reported last March. Internet use is highest among minority business owners (86%); with 63% of women business owners also reported using the Internet. "Younger" companies are also more likely to use the Internet compared to "older" small businesses (78% vs. 69%).

Small businesses continue to use the Internet for a wide variety of tasks, including making travel plans (38%), purchasing supplies (37%), servicing customers (36%), conducting market or industry research (33%), making purchases from wholesalers (25%), networking with other small business owners (24%), and managing accounts and bill payment (22%). More small businesses also report using the Internet for marketing or advertising purchases (35%), up from 29% reported last March.

Survey Methodology

The OPEN Small Business Network Semi-Annual Monitor, released each March and October, is based on a nationally representative sample of 766 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by International Communications Research (ICR) from September 16-October 3, 2002. The poll has a margin of error of +4.4%.

About OPEN: The Small Business Network from American Express

OPEN: The Small Business Network is a division of American Express that offers small business owners a wide range of tools, services and savings designed to meet their evolving needs, including charge and credit cards, convenient access to working capital and credit information, enhanced online account management capabilities and savings on business services from an enhanced lineup of partners. To obtain more information about the OPEN Network, visit OPEN.americanexpress.com or call 1-800-NOW-OPEN to apply for a card or loan.

American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a world leader in charge and credit cards, Travelers Cheques, travel, financial planning, business services, insurance and international banking.

Attention Editors: Press release and additional press materials can be found online at: http://www.americanexpress.com/corp/latestnews/osbnm2002.asp

CONTACT:

M Booth & Associates, New York
Christina Friedkin/Kurt Rossler
212/481-7000

Christinaf@mbooth.com
Kurtr@mbooth.com
or
American Express, New York
Tom Sclafani, 212/640-0541
Thomas.M.Sclafani@aexp.com

SOURCE: American Express