2016 Economic Forecast: Insights from Small and Mid-Sized ... · 2016 Economic Forecast: Insights from Small and Mid-Sized Business Owners Craig Everett, Ph.D., MBA ... I’d also

A Higher Degree of You02.23.16

PRIVATE CAPITALMARKETS PROJECT

bschool.pepperdine.edu/privatecapital

P E P P E R D I N E

2016 Economic Forecast: Insights from Small and Mid-Sized Business Owners

Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project

A Higher Degree of You


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PUBLISHED BY

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ACKNOWLEDGEMENTS

I’d also like to thank the following people at The Graziadio School of Business and Management for their contributions:

David M. Smith, Ph.D. Dean

John K. Paglia, Ph.D.

Associate Dean, Associate Professor of Finance

Lisa Perry Director of Marketing & Communications

Irina Shaykhutdinova Research Associate

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•  25 questions •  Invite to participate distributed to sample from Dun & Bradstreet business database

•  2,469 completed responses •  Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)

•  Responses collected from Feb 2 – Feb 19, 2016

ABOUT THE 2016 ECONOMIC FORECAST SURVEY



This research was made possible with the support of Dun & Bradstreet.

DUN & BRADSTREET

Jeffrey Stibel Vice Chairman

Judy Hackett

Chief Marketing Officer

Aaron Stibel Chief Technology Officer

Heather Herndon

Director, Marketing and Communications

Lauren Simpson Marketing and Communications Manager

Bernice Brennan

Director, Creative Services

Ben Pollock Marketing Manager

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2016 ECONOMIC FORECAST

Projec+ons in January 2016 Projec+ons in January 2015

Whole sample <$5 million $5-‐$100

million Whole sample <$5 million $5-‐$100 million

This year US GDP 0.4% 0.4% 0.5% 1.1% 1.1% 1.6%

Next year US GDP 1.3% 1.3% 1.1% 1.6% 1.6% 2.0%

Probability of US recession in the next year 32.5% 32.8% 29.9% 25.5% 25.8% 22.1%

S&P 500 0.9% 1.1% 0.0% 4.4% 4.4% 5.1%

US Unemployment Rate (12/31) 6.3% 6.4% 5.6% 6.1% 6.1% 6.1%

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CONFIDENCE IN GDP GROWTH PROJECTIONS

7

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Very unsure Somewhat unsure

Neither confident not unsure

Somewhat confident

Very confident

12% 11%

34% 34%

8% 12% 11%

33% 34%

9% 13% 10%

40% 32%

5%



CONFIDENCE IN BUSINESS GROWTH PROSPECTS

8

0% 20% 40% 60% 80%

100%

More confident Somewhat more confident

Neither more nor less confident

Somewhat less confident

Less confident

2012 22% 32% 26% 12% 8% 2013 21% 24% 25% 15% 15% 2014 27% 29% 24% 10% 11% 2015 35% 31% 22% 7% 6% 2016 50% 36% 10% 4%



Impediments

Most Influen+al Least Influen+al

Respondents in 2016 Respondents in 2015

Respondents in 2016 Respondents in 2015 Whole

sample <$5

million $5-‐$100 million

Whole sample

<$5 million

$5-‐$100 million

Limited access to capital 26% 28% 12% 24% 41% 38% 59% 40%

Government regula+ons (tax, healthcare) 35% 34% 41% 38% 15% 16% 10% 15%

Global poli+cal and/or economic environment 23% 22% 26% 27% 9% 9% 7% 9%

Domes+c (U.S.) economic and/or poli+cal environment 23% 23% 24% 18% 28% 29% 18% 29%

THE MOST AND THE LEAST INFLUENTIAL IMPEDIMENTS TO U.S. GDP GROWTH NEXT YEAR

9



CHANGES IN ECONOMIC FORECAST OVER THE YEARS

January 2016

January 2015

January 2014

January 2013

January 2012

January 2011

This year US GDP (Q4/Q4) 0.4% 1% 0.6% 0.4% 0.7% 2.0%

Next year US GDP (Q4/Q4) 1.3% 2% 1.2% 0.9% 1.9% 2.5%

US Unemployment Rate (12/31/2012) 6.3% 26% 7.7% 8.0% 8.7% 9.1%

US Housing prices (Q4/Q4) 0.9% n/a 2.8% 3.0% -‐0.8% -‐1.8%

S&P 500 (Q4/Q4) 32.5% 4% 4.0% 3.4% 2.5% 6.5%

Probability of US Recession in 2012 0.4% 6% 29.2% 36.2% 32.0% 28.4%

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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS BY SIZE

11

0% 5% 10% 15% 20% 25% 30% 35%

0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 31-‐40 41-‐50 51-‐75 76 -‐ 100

101 -‐ 200

Whole sample 32% 34% 19% 7% 3% 1% 1% 1% 0% 0% 0% 0% < $5 million 34% 35% 18% 7% 3% 1% 1% 0% 0% 0% 0% 0% $5 million -‐$100 million 18% 23% 25% 14% 6% 5% 1% 2% 2% 1% 1% 1%



NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE UNDER $5 MILLION

12

0%

20%

40%

60%

80%

100%

0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 2012, <$5 million 47% 34% 10% 3% 1% 0% 0%

2013, <$5 million 48% 34% 11% 4% 1% 0% 0%

2014, <$5 million 43% 35% 14% 5% 1% 1% 0%

2015, <$5 million 45% 33% 13% 5% 1% 1% 1%

2016, <$5 million 34% 35% 18% 7% 3% 1% 1%



NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE BETWEEN $5 MILLION AND $100 MILLION

13

0%

20%

40%

60%

80%

100%

0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 31-‐40 41-‐50 More than 50

2012, $5M -‐ $100M 27% 21% 21% 10% 5% 3% 3% 1% 1% 2%

2013, $5M -‐ $100M 32% 22% 18% 12% 6% 2% 4% 1% 1% 1%

2014, $5M -‐ $100M 23% 26% 22% 13% 6% 2% 3% 2% 1% 2%

2015, $5M -‐ $100M 27% 22% 24% 11% 3% 4% 3% 3% 1% 2%

2016, $5M -‐ $100M 18% 23% 25% 14% 6% 5% 1% 2% 2% 4%



PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE

14

0%

20%

40%

60%

80%

100%

Whole sample <$5 million $5-‐$100 million

52% 48%

74%

53% 51%

78%

56% 51%

69%

2014 2015 2016



PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS

15

0%

20%

40%

60%

80%

100%


58% 55%

79%

60% 58%

77% 65% 62%

80%

2014 2015 2016



PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX

16

0%

20%

40%

60%

80%

100%


12% 13% 8% 18% 18% 15%

22% 23% 17%

2014 2015 2016



PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE

17

0%

20%

40%

60%

80%

100%


57% 58% 49% 43% 43% 41%

49% 49% 46%

2014 2015 2016



PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR

18

0%

20%

40%

60%

80%

100%


42% 41% 52% 47% 46%

58% 47% 46%

59%

2014 2015 2016



PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR

19

0%

20%

40%

60%

80%

100%


60% 60% 63% 68% 68% 69% 71% 72% 69%

2014 2015 2016



POLICIES TO HELP SPUR U.S. JOB CREATION

20

0% 20% 40% 60% 80%

100%

Regulatory reform Tax incen+ves Increased access to capital

Educa+on reform Increased compe++ve posi+on with foreign

trade partners

Repeal or Modify Affordable Care Act

2011 17% 19% 44% 14%

2012 28% 21% 30% 5% 15%

2013 28% 28% 26% 6% 13%

2014 13% 19% 22% 6% 8% 32%

2015 13% 23% 23% 8% 9% 23%

2016 12% 23% 26% 7% 12% 20%



POLICIES SUPPORTED IN 2016

21

75%

82% 66%

32%

48%

55%

34%

28%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Raising the debt ceiling when limit is reached in early March

Balanced US Budget

Comprehensive immigra+on reform with a path to ci+zenship

Democrats retaining control of the Senate in November

Repeal of the Affordable Care Act

Significant Reform of the Affordable Care Act

Con+nua+on of "Quan+ta+ve Easing" by Federal Reserve

Congress con+nuing to extend long-‐term unemployment benefits



CANDIDATES FOR U.S. PRESIDENT WHICH OFFER THE BEST POLICIES FOR SMALL BUSINESS ACORDING TO RESPONDENTS

22

0%

20%

40%

60%

80%

100%

Donald Trump

Hilary Clinton Bernie Sanders

Ted Cruz John Kasich Marco Rubio Jeb Bush Ben Carson Other

Whole sample 34% 18% 12% 8% 7% 5% 4% 3% 9%

<$5 million 34% 18% 13% 7% 6% 6% 4% 3% 9%

$5-‐$100 million 32% 13% 6% 12% 18% 6% 4% 2% 8%



DETAILS ABOUT THE RESPONDENTS GEOGRAPHIC LOCATION

23

Less than or equal to 1011 - 2526 - 5051 - 7576 - 100101 - 150151 - 200more than 200

CA#

OR#

WA#

MT# ND# MN#

ID#WY#

SD#

NV#UT#

AZ#

CO#

NM#

TX#

NE#

KS#

OK# AR#

LA#MS# AL#

FL#

GA#

TN#SC#

NC#

VA#WV#KY#MO#

IL#IA#

WI#MI#

IN#OH#

MD#

PA#NJ#

NY#

ME#

NH#VT#MA#RI#

CT#

HI#AK#



DETAILS ABOUT THE RESPONDENTS INDUSTRY

24

28%

14% 10% 8%

7% 7%

6% 5%

4% 3% 3% 2% 1% 2% Services

Construc+on Retail trade Finance & real estate Manufacturing Informa+on technology or services Transporta+on and warehousing Health care Wholesale trade Educa+onal services Arts, entertainment or recrea+on Forestry, fishing, hun+ng or agriculture U+li+es & mining Unclassified establishments



DETAILS ABOUT THE RESPONDENTS ANNUAL REVENUES

25

7% 5% 3% 4% 7%

10%

15% 11% 10%

9% 8%

4% 3% 1% 1% 3% $0 or pre-‐revenue stage

$1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐ $25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $10,000,000 $10,000,001 -‐ $25,000,000 $25,000,001 -‐ $50,000,000 $50,000,001 -‐ $100,000,000 $100,000,001 -‐ $500,000,000



ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE

26

5% 2% 1%

3% 3% 2%

3% 2% 3%

23%

11%

6%

10%

5% 5% 4% 3% 3%

6% 3.6%

0%

5%

10%

15%

20%

25%

Decline Increase



ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M

27

5%

2% 2% 3% 3%

2% 3%

2% 3%

23%

11%

5%

9%

5% 5% 4% 3% 3%

7%

3.1%

0%

5%

10%

15%

20%

25%

Decline Increase



ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M

28

2% 5%

2% 3% 4% 2%

18%

11%

6%

14%

6% 8% 7%

5%

1%

5%

7.8%

0% 2% 4% 6% 8%

10% 12% 14% 16% 18% 20%

Decline Increase



ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE

29

2% 1% 1% 1% 2% 2% 1% 1%

15% 13%

11% 12%

7% 7% 7%

4% 3%

10% 11.5%

0% 2% 4% 6% 8%

10% 12% 14% 16%

Decline Increase



ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M

30

2% 1% 1% 1% 2% 2% 1% 1%

14% 13%

10%

12%

6% 7%

7%

4% 4%

12% 12.0%

0% 2% 4% 6% 8%

10% 12% 14% 16%

Decline Increase



ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M

31

1% 1% 2%

4% 1%

16%

12%

15%

11% 12%

7% 9%

4%

1%

4%

8.6%

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%

Decline Increase



DETAILS ABOUT THE RESPONDENTS ANNUAL INCOME

32

10% 9% 6%

9%

14% 17%

15%

7% 5% 3%

2% 1% 1% 1% Nega+ve (net loss) $1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐$25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $50,000,000 $50,000,001 -‐ $100,000,000 Greater than $100,000,000



DETAILS ABOUT THE RESPONDENTS TOTAL BUSINESS ASSETS

33

3% 10% 8%

9%

10% 12% 11%

8%

8% 6%

5% 3% 2% 5% $0

$1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐ $25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $10,000,000 $10,000,001 -‐ $25,000,000 Greater than $25,000,000



DETAILS ABOUT THE RESPONDENTS FIRM AGE

34

9% 8% 7%

10%

18% 20%

28%

Less than 1 year

At least 1 but less than 2





20 or more



DETAILS ABOUT THE RESPONDENTS NUMBER OF FULL-TIME EMPLOYEES

35

8%

46%

19%

10% 4%

13% 0 1-‐2

3-‐5 6-‐10

11-‐15 More than 15



DETAILS ABOUT THE RESPONDENTS NUMBER OF PART-TIME EMPLOYEES

36

43%

33%

13% 5% 2%

4% 0 1-‐2

3-‐5 6-‐10

11-‐15 More than 15



DETAILS ABOUT THE RESPONDENTS PRIMARY BUSINESS ACTIVITY

37

32%

68%

Sales Service



DETAILS ABOUT THE RESPONDENTS PERCENTAGE OF CERTIFIED WOMEN-OWNED BUSINESSES

38

0%

20%

40%

60%

80%

100%

Whole sample < $5 million $5 million -‐$100 million

19% 20% 10%



About Pepperdine Private Capital Markets Project The Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management is the first simultaneous, comprehensive, and on-going investigation of the major private capital market segments. The research seeks to understand the true cost of private capital across market types and the investment expectations of privately-held business owners; providing lenders, investors and the businesses that depend on them with critical data to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized. Download reports and find more information at http://bschool.pepperdine.edu/privatecapital. About Pepperdine University’s Graziadio School of Business and Management A leader in cul+va+ng entrepreneurship and digital innova+on, the Pepperdine University Graziadio School of Business and Management focuses on the real-‐world applica+on of MBA-‐level business concepts. The Graziadio School provides student-‐focused, globally-‐oriented educa+on through part-‐+me, full-‐+me, and execu+ve MBA programs at our five Southern California loca+ons and Silicon Valley, Santa Barbara, and Dallas campuses as well as through online and hybrid formats. In addi+on, the Graziadio School offers a variety of master of science programs, a bachelor of science in management degree-‐comple+on program, and the Presidents and Key Execu+ves MBA as well as execu+ve educa+on cer+ficate programs. Follow the Graziadio School on Facebook (www.facebook.com/pepperdine.graziadio), Twiker at @GraziadioSchool (hkps://twiker.com/graziadioschool) and LinkedIn (hkps://www.linkedin.com/edu).

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Thank YouCraig Everett, Ph.D., MBA

Director, Pepperdine Private Capital Markets Project http://bschool.pepperdine.edu/privatecapital

[email protected] 310.506.8543

Documents

2016 Economic Forecast: Insights from Small and Mid-Sized ... · 2016 Economic Forecast: Insights from Small and Mid-Sized Business Owners Craig Everett, Ph.D., MBA ... I’d also