Small Business Optimism Rises Sharply but Hiring Plans Hold Steady, According to the OPEN Small Business Network 2003 Semi-Annual Monitor from American Express  

NEW YORK-- (BUSINESS WIRE)-- 10/15/2003 -- Three-Quarters of Business Owners Say They Can Improve to Become Better Bosses

Small business optimism is on the increase, according to the OPEN Small Business Network(SM) 2003 Semi-Annual Monitor from American Express (NYSE:AXP).

Nearly three-quarters (72%) of small businesses now see growth opportunities for their businesses over the next six months, up sharply from 64% in the fall of 2002. In addition, 62% of businesses say they plan to make capital investments in the next six months (up from 56% a year ago), and fewer businesses are reporting cash flow concerns, 55%, down from 63% a year ago.

Despite heightened levels of optimism, businesses appear to be keeping their hiring plans in check. Overall, a third (34%) of small businesses report plans to hire over the next six months, up from 26% reported a year ago, but steady compared to spring 2003 (35%). The survey found that businesses plan to recruit equally for full and part-time positions (18% vs. 19%).

Small business hiring plans vary widely by region and by a company's age. Businesses in the West are more likely to have hiring plans (42%) than those in the North East and the South (both 33%), and those in the North Central states (29%). In addition, start-up enterprises, defined as companies in business for three or fewer years, are more likely to have hiring plans than more established companies (45% vs. 32%).

Businesses with hiring plans report that their primary motivation to add employees was to handle growing business. With a focus on growth and rising levels of optimism, these business owners appear more willing to offer a wider range of benefits compared to small business overall. The survey found that firms planning to hire are more likely to offer employee benefits such as paid vacation (64% vs. 53%), paid holidays (58% vs. 48%), flexible work hours (53% vs. 42%) and life insurance (23% vs. 18%), compared to small businesses overall. Twice as many firms with hiring plans have profit sharing plans (21% vs. 12%).

Overall, one in five small businesses offer employees a 401k plan (19%), and the number of firms offering health care benefits fell slightly compared to 2002 (58% vs. 61% in fall 2002). Among start-ups, 37% offer healthcare to employees. Interestingly, women-owned companies are more likely to offer flexible work hours than small business overall (53% vs. 42%).

"Business owners are clearly feeling better about their prospects for growth compared to one year ago, with more planning to hire, fewer reporting cash flow concerns and an increase in the number of those planning capital investments," said Kerry Hatch, executive vice president and general manager, OPEN: The Small Business Network from American Express. "However, business owners are still keeping a watchful eye on the overall economy, which they once again site as the top factor that could impede their growth prospects."

According to the survey, similar to last year, businesses planning to make capital investments in the next six months put computers and peripherals at the top of their list (29%), followed by office equipment (15%) and real estate, manufacturing equipment and office furnishings (all 11%). Companies planning to hire are more likely to make capital investments than small businesses overall (73% vs. 62%). Start-ups are more likely than older businesses to make capital investments (70% vs. 60%).

Despite these plans to invest in their companies, many business owners still report facing a wide range of cash flow concerns, with most concerned about having enough cash on-hand to win new business (15%); their ability to pay bills on time (14%); and accounts receivable (13%). Business owners cite a variety of tactics to address cash flow crunches, including putting off purchases (25%); obtaining and using a line of credit (22%); using a charge or credit card (13%); taking out a short-term loan (10%); or leasing rather than purchasing business equipment (5%). The primary way for women-owned businesses to address cash flow issues is to put off purchases (34%); for ethnic minority owned businesses it is to obtain and use a line of credit (36%).

The survey also found that credit and charge cards remain an important financing tool for small businesses, with nearly three-quarters (73%) using "business plastic" to pay for business expenses. The most common purchase using business credit or charge cards is office supplies (47%) followed by travel (42%), computer equipment purchases and wholesale purchases (tied, 36%), entertainment (31%), and business or professional services (24%).

Becoming a Better Manager and Boss

In addition to probing on business growth opportunities, hiring and investment plans, the OPEN Small Business Network 2003 Semi-Annual Monitor asked business owners about the ways they run their companies. Most business owners (82%) saw opportunities to enhance their own business skills. The top disciplines where owners reported plans to seek self-improvement are marketing (44%), sales (33%), business management and planning (30%), financial analysis/planning (28%), and negotiation (21%). These business owners planned to employ a variety of tactics to enhance their business skills development, including reading a book (49%), attending a seminar or conference (48%), talking to a peer (48%), and searching for information on the Internet (48%). Thirty nine percent also said they would take a class.

"From talking with business owners, we know they value input and advice from their peers, and the survey found that networking continues to be an important resource for them," Hatch added.

The survey also found that desired areas of improvement vary among different segments of business owners. For example, ethnic minority business owners - compared to business owners overall - are nearly twice as likely to want to further develop their decision making skills (34% vs. 17%), their sales skills (60% vs. 33%) and negotiating skills (39% vs. 21%). When developing these skills, these business owners were almost twice as likely to talk to a management consultant to develop business skills as business owners overall (40% vs. 21%). Start-ups were more likely to talk to a financial advisor than business owners overall (39% vs. 29%). Compared to overall small businesses, women business owners are more keenly focused on improving their marketing skills (55% vs. 44%).

Further, nearly three-quarters (72%) of business owners saw room for improvement as bosses. According to the survey, the top improvement they could make to become a better boss was to become better communicators (18%), followed by rewarding and motivating employees more (16%) becoming a better listener (14%), providing their employees more opportunities for skills development (13%) and providing more constructive feedback on employees' work (12%).

In addition, rewarding employees for outstanding performance was the top way to improve as bosses for ethnic minority business owners (26% vs. 16% for small business overall) and start-ups (24% vs. 16% overall). Top for women business owners was becoming a better communicator (23% vs. 18% overall).

According to the OPEN Small Business Network 2003 Semi-Annual Monitor, two-thirds (65%) of business owners overall are also voicing concerns regarding computer usage. Guarding against viruses tops the list of computer concerns among small businesses (18%), followed by the cost and time to train staff on new software (15%), managing spam (14%) and securing their computers from hackers (8%). One-quarter (23%) reported having no computer-related concerns.

Survey Methodology

The OPEN Small Business Network Semi-Annual Monitor, released each March and October, is based on a nationally representative sample of 787 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by International Communications Research (ICR) from September 8- September 19, 2003 . The poll has a margin of error of +/-3.5%.

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: www.americanexpress.com/corp/latestnews/osbnfallsurvey.asp

CONTACT:M Booth & Associates Christina Friedkin/Kurt Rossler, 212-481-7000 Christinaf@mbooth.com Kurtr@mbooth.com or American Express Tom Sclafani, 212-640-0541 Thomas.M.Sclafani@aexp.com
SOURCE: American Express Company
10/15/2003 13:38 EASTERN