Small business owners in the Greater Philadelphia area are increasingly confident about their companies’ financial performance, according to the third annual Small Business Pulse Check by TD Bank, America’s Most Convenient Bank. Sixty-two percent of respondents said they were optimistic or excited about 2016. One in five anticipate it will be their “best year yet.” This is the strongest optimism reading TD’s area pulse check has produced since the survey began in 2013.
Among the 300 small business owners in metro Philadelphia, South Jersey and Delaware surveyed during between Nov. 18–28, 2015, an overwhelming majority also indicated that they would close out 2015 strong, with 77 percent of respondents saying they expect to meet or exceed their annual revenue goals, up slightly from 74 percent in 2014.
Optimism about achieving 2015 revenue goals was particularly strong among respondents in specific sectors including:
- Manufacturing and Labor – 88 percent
- Tech and Information – 87 percent
- Service – 81 percent
- Professional – 73 percent
- Retail and Recreation – 68 percent
Looking forward, more than a quarter of area small businesses (26 percent) anticipate exceeding their revenue goals in 2016, the first increase in this category since 2013, when 19 percent of respondents expected to make similar gains.
“For the past several years we’ve worked with local small businesses to help them navigate a very challenging economic environment,” said Mike Carbone, Regional President for TD Bank, metro Philadelphia market. “It’s encouraging to see confidence levels among this group rise as we enter 2016, for both the local small business marketplace and the Greater Philadelphia economy overall.”
Local Impact: Taxes, Legislation, and Other Factors Remain a Challenge
Nearly one-third of respondents cited high local taxes as the biggest challenge of doing business in the Greater Philadelphia area. Businesses in the retail and professional services sector feel particularly burdened, with 38 percent of those businesses naming local taxes as their top challenge.
Other often-cited local challenges include:
- Finding skilled labor – 16 percent
- Local or state governments not passing budgets or funding – 14 percent
- Finding affordable space or increasing rents – 12 percent
Just 12 percent of area businesses agreed with the statement that the local economy was having a positive or somewhat positive impact on their business, yet 33 percent indicated they had benefitted from low commodity (oil and gas) prices. Businesses in the service and manufacturing/labor sectors were most likely to cite the benefit of low commodity prices (42 percent) compared with other sectors.
Tri-State Small Businesses to Expand
Forty percent of small business owners said that expanding their product and service offerings was a top priority for 2016, up from 33 percent last year. Streamlining costs, the second highest priority named, will be slightly less of a focus in 2016 (24 percent) than it was in 2015 (27 percent).
Reported hiring patterns have remained stable since 2013, with 72 percent of respondents indicating they would maintain their current employment levels this year. Nonetheless, only 17 percent of businesses said they expected to grow in size.
Federal Reserve’s Interest Rate Policy May Dampen Appetite for Borrowing
Small businesses in the area are generally showing more confidence in applying for financing, with 31 percent of respondents saying they had either applied for credit in the past 12 months (20 percent vs. 12 percent last year) or would apply for credit in the next 12 months (13 percent vs. 8 percent last year). Yet 27 percent of business owners planning to apply for a loan or line of credit within the next 12 months reported they are less likely to do so now that the Federal Reserve raised interest rates.
While area small businesses recently have become more receptive to re-entering the credit market, the Federal Reserve’s recent interest rate hike may negatively impact that sentiment.