Small business owners generally feel better about the state of America’s economy, but they are still cautious enough to have prepared for an economic downturn, a new study by Hiscox has found.
The study, which surveyed 1,000 US small business owners, found that over half of the respondents (57%) said they are optimistic about the current state of the economy compared to a year ago. Conversely, 90% of small business owners said they have taken steps to prepare their businesses for a downturn.
Hiscox also noted that many small business owners are confident about their business performance in the year ahead. A little more than half (51%) of small business owners expect their profits to increase in the next 12 months. Notably, 93% of respondents said that they are optimistic about the year ahead – this outlook is driven by new customers (60%), steady/improved demand (47%), and new products (30%).
Despite the confidence, small business owners remain cautious and prepared for any volatile economic conditions. When asked about which internal risks they are most concerned about, small business owners identified attracting new clients (39%), maintaining profitability (34%), passing cost increases on to customers (17%) and receiving timely payments from customers (17%).
In terms of external risks, small business owners listed government and political issues as one of their chief concerns, specifically issues surrounding taxes (21%), economic growth (20%) and healthcare policy (12%).
Sixty-six percent (66%) of respondents said that their business is prepared for an economic downturn, but only one in five feel that they are “very prepared.”
The steps that respondents are taking in order to prepare for economic risks include reducing expenses (43%), setting up an emergency savings fund (38%) and increasing marketing efforts (31%).
“Small business owners are risk-takers, so it should come as no surprise that in a strong economy they are looking to expand and grow the profitability of their businesses,” commented Hiscox USA executive vice-president of small business insurance Kevin Kerridge. “But small business owners also recognize there are many factors that could alter their plans, so many have taken steps to prepare for a change in conditions while continuing to focus on activities that will drive growth.”