San Francisco (PRESS RELEASE – February 19, 2011) – The majority of California’s small business owners (54 percent) believe 2011 will be better than 2010, with 36 percent expecting it to be the same as last year and only 10 percent expecting it will be worse, according to the latest Citibank small business survey. Moreover, Citibank’s latest survey shows an increase in California entrepreneurs’ optimism about both current and future business conditions, offering a strong indication that after battling through the recession, small businesses are finally poised for growth.
According to the survey, 34 percent of California’s small business owners say their business situation is better than a year ago, up from 28 percent in September and just 19 percent in March of last year. Additionally, the number of California business owners who rate their business situation as worse than a year ago declined to 32 percent, down from 35 percent in September and 45 percent in March.
“Small businesses are the largest source of jobs in the state of California, and their growing optimism represents an incredibly positive development,” said Rebecca Macieira-Kaufmann, President of Citibank California. “Though challenges remain, the results of our latest survey provide strong evidence that California’s small businesses feel more confident about the current environment and about 2011.”
Business Environment Full of Unknowns
Of course, from unemployment to the rising costs of running a business, California entrepreneurs still face many unknowns. Business owners say the increasing cost of healthcare (24 percent) and rising raw material prices (21 percent) pose the biggest challenges in 2011. And though concern over another downturn dropped to 79 percent in the latest survey, down from 84 percent in September, it is clearly still on the minds of many entrepreneurs.
Yet many California small business owners do not appear concerned about the impact of government policies in 2011, with 40 percent expecting policies to remain the same and 22 percent expecting them to be more favorable; 38 percent say they expect less favorable policies this year.
When discussing what would make the most positive impact on their business this year, respondents cite reducing taxes (28 percent), increasing credit availability (21 percent) and lowering healthcare costs (17 percent).
Business Costs Expected to Rise, Hiring Plans Tepid
The increasing optimism did not reveal itself in hiring plans, which remained flat compared to previous surveys. The majority of California’s small business owners (75 percent) continue to say they plan to keep the same number of employees over the next 12 months, while 18 percent say they will increase employees and 7 percent say they will reduce jobs. When discussing what would spur hiring, 88 percent say increased sales.
On an array of expenses, the majority of respondents expect the costs of running their business to increase this year. According to the survey:
- 80 percent expect the cost of healthcare to increase.
- 78 percent expect the cost of raw materials to rise.
- 77 percent expect utility costs to rise.
- 65 percent expect taxes to increase.
- 54 percent expect the cost of borrowing to increase.
At the same time, 58 percent do not expect to raise the prices they charge this year, compared to 42 percent who say they will raise prices.
California respondents say that to grow or improve their business in 2011, they plan to work longer hours themselves (61 percent), increase marketing (55 percent), or do business in a larger geographic area (44 percent). More than half (61 percent) say they plan to offer new products or services in the coming year or expand into new markets (51 percent).
Realistic but Passionate
Despite the challenging conditions, business owners remain passionate about their choice of career, with 76 percent saying they would start their business again even if they knew then what they know now about the challenges they would face, and 66 percent saying they would recommend entrepreneurship as a career to their children, up from 60 percent in September.
About the Survey
This Citibank poll was conducted via telephone by Abt SRBI from Jan. 11 to Jan. 28 among a national random sample of 1,002 small businesses in the United States, with revenue over $100,000 and no more than 100 employees. The margin of error is approximately +/- 3.1% percentage points at 95% confidence. Surveys are subject to other error sources as well, including sampling coverage error, recording error, and respondent error.
Citibank is a member of Citi, the leading global financial services company, which has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.