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Majority of U.S. Small Businesses and Mid-Sized Companies Expect Revenue and Profit Growth in 2013

  • New Study Shows Continued Caution, But Signs of Improved Outlook
  • Companies Unsure About Impact of Tax Deal and Affordable Healthcare Act

Although small businesses and mid-sized companies can hardly be described as bullish in their economic outlook, new research from Greenwich Associates shows new signs of optimism among this critical group.

The results of the March 2013 Greenwich Market Pulse show owners and executives at both small and mid-sized companies are becoming increasingly optimistic about the own companies’ prospects for financial growth. A majority of small businesses and mid-sized companies expect revenues and profits in their businesses to increase 2013. Fully 62% of executives at mid-sized companies expect revenues to grow 1% or more, with 29% expecting revenue growth of 5% or more, and 55% expect profit growth. A similar view is held by small businesses: 56% expect revenue growth in 2013and 48% expect profits to grow. A majority of firms in both categories also expect staffing levels to either hold steady or increase this year—a positive sign for the employment market.

“However, our research results show that although small businesses and mid-sized companies are relatively optimistic about the prospects of their businesses in 2013, they are slightly less sanguine about the economy as a whole,” says Greenwich Associates consultant David Heiner.

Although the Greenwich Optimism Index does show signs of improvement in the economic outlook among both small business and mid-sized companies, the results remain far from bullish. Among mid-sized companies the index in the first quarter moved to positive territory from negative — indicating that the number of businesses expecting the U.S. economy to improve now exceeds the ‘net’ number expecting the economy to deteriorate. Although Q1 results show a modest improvement in the outlook of small businesses, the index remains in negative territory—indicating that the number of businesses expecting the U.S. economy to deteriorate still tops exceeds the number expecting the economy to improve.

Lingering Uncertainties

Owners and executives at small businesses and mid-sized companies are uncertain about how major legislative changes will affect their businesses. The results of the 2012 U.S. presidential election reaffirmed the continued implementation of the Affordable Care Act, but mid-sized companies and small businesses are still unsure of exactly what it will mean to them. Only about one third of both segments believe they fully understand the implications of the legislation, and about two-thirds are unconvinced that the act will have any benefit to their businesses in the mid- to long-term. This is especially evidenced by the small portion of small businesses that have changed plan providers in the last year (9%) and the larger portion who have taken no proactive step to better manage healthcare costs (39% have taken no action to minimize costs in 2013). Nonetheless, 81% of small businesses and 97% of mid-sized companies surveyed reported that they offered a healthcare plan to their employees- and three-quarters of those plans had a full coverage option.

Despite countless news coverage dedicated to the U.S. “fiscal cliff” negotiations, the impact of the resulting deal on the 2013 tax situations of U.S. companies remains a mystery to most business owners and executives. Only 41% of small businesses and 51% of mid-sized companies indicated that they “somewhat” or “completely” agree that they have a solid understanding of their tax situations.