Presidential Candidates should listen to what Small Business Owners Say

Now that the Iowa Caucus is over, the race for President is heating up. Ultimately, someone will win and someone will lose. Usually, the winner is the candidate who connects best with the largest constituency. On the other hand, the loser does not. One of the largest constituencies in the country is small-business owners. The Commerce Department’s latest census of small business (which is called the Survey of Business Owners) was completed in 2007. The census indicated that there are 26.3 million small businesses in the country.

The owners of the vast majority of those businesses worked full-time for someone else and use their business to earn additional income. However, 5.2 million small-business owners actually employ someone. In fact, they employed about 60 million workers in 2007. So this is a constituency that the presidential candidates must take very seriously.

We conducted the Gazelle Index national survey to determine how these business owners feel about various policies that are being proposed by the presidential candidates. The survey was issued in October and completed in November, and it included 631 randomly selected CEOs of businesses with 10 to 100 employees. The survey has a 5% margin of error.

Before we discussed the results, one result from the Commerce Department census should be noted. That is, persons that are members of racial or ethnic minority groups (i.e. Blacks, Hispanic/Latino, and Asians) comprise 21% of the nation’s 26.3 million small-business owners. In addition, women business owners comprise 46%. The two groups together make up well over 50% of the country small-business owners. This is a point that is seldom recognized when organizations conduct national surveys of small businesses.

More importantly, over the last 15 years the number of minority-owned small businesses increased by 600%, and the number of women-owned businesses increased by 200%. In contrast, the number of nonminority businesses (principally white) increased by only 47% over the same. This means that the nation’s profile of small-business owners is becoming very diverse, as the profile of the labor force is. For this reason, the Gazelle Index national survey solicited the sentiments of all small-business owners, minority, nonminority and women to see if there are significant differences of opinion among them.

Summary of Survey Results: Here is a summary of what the political candidates should learn from small-business owners. They should advocate policies aimed at cutting taxes on businesses and corporations, make loans more easily available to small-business owners, stop wrangling over the deficit-reduction plan and do something about it, and don’t wait for our economic problems to resolve themselves, but be proactive. Finally, special attention should be given to the West because that is the region of the country where small-business owners expect to increase hiring the least.

Interestingly, in many instances the results varied by race and gender group. Therefore, the smart candidate for President should make a note of the fact that one shoe does not fit all small business constituencies. Instead, some policies are much more important to particular race, gender and ethnic groups. We point out those differences below, and the candidates for President might want to keep them in mind as they position themselves for a run at the presidency. Here is what the survey found:

Question 1: What are Small Business Hiring Plans over the Next Three Months?

Answer: Almost twice as many small businesses will increase hiring than will decrease hiring over the next three months. Specifically, 26.6% said they intend to increase hiring while only 14.4% said they will reduce hiring; 59.0 % of owners indicated that their future hiring will not change.

The most notable exception across the race and gender groups: responses from each race and gender group, except Hispanic/Latinos, indicated that twice as many small-business owners will increase future hiring than will decrease hiring. However, among Hispanic/Latinos, only 20.0% indicated they will increase future hiring, while 17.6% indicated they will decrease future hiring.

Question 2: What Government Policies would be most effective at Getting small-business owners to Hire More Workers?

Answer: Reducing taxes on businesses and corporations. This was cited as the most important policy, if the objective is to increase hiring. Specifically, 41.3% of small-business owners said that if the government reduced taxes on businesses and corporations, they would definitely increase hiring; 30.1% said they might increase hiring; 26.4% said it would have no effect on their employment, and 2.1% said it would cause them to decrease hiring.

The most notable exception across the race and gender groups: While all groups said this policy would lead them to increase hiring, reducing taxes was much more important to Hispanic/Latinos that two other groups. Specifically, 54.5% of Hispanic/Latinos said that if taxes were reduced, they would definitely increase hiring. The same was true for 41.9% of blacks, 37.2% of whites, and 38.1% of women.

The second most important policy, after reducing taxes, is making loans more easily available to small-business owners. That is, 36.9% of business owners said that if the government made small-business loans easier to get, they would definitely increase hiring; 25.0% said they might increase hiring; 37.1% said that it would have no effect; and 1.0% said they might decrease hiring as a result.

The most Notable Exception across Groups: Making small-business loans more easily accessible was the most important policy to African-Americans; 50.0% said they would definitely increase hiring if this were the case; 43.5% of Hispanics indicated this; 33.9% of women; and only 25.5% of whites.

Question 3: How Optimistic are small-business owners about the future?

Answer: 27.5% of small-business owners indicated that they are more optimistic about the future when compared to the present. However, 25.9% said that they are more pessimistic about the future, and 46.6% indicated their level of future optimism is the same as their present level. The results indicate that there are just as many small-business owners who are pessimistic about the future as there are those who are optimistic about the future.

The Most Notable Differences between the Groups: There was little difference in the degree of optimism versus the degree of pessimism across the groups— except for African-Americans. Specifically, 35.5% of African-Americans indicated they are more optimistic about the future than the present while only 20.9% indicated they are more pessimistic about the future. Blacks expressed the highest level of optimism relative to pessimism of all groups in the survey.

Question 4: What Government Actions is likely to Dampen Small Business Optimism and Confidence?

Answer: If Democrats and Republicans fail to reach an agreement on a deficit reduction plan, it would cause a significant increase in pessimism. That is, 53.6% of small business owners said the political debate and stalemate in Washington over the deficit has made them more pessimistic; while only 9.2% said it made them more optimistic; and 37.2% said it had no effect.

Question 5: In what Regions of the Country is Small Business Hiring Likely to be Strongest in the future?

Answer: the South, Midwest and Northeast, and It will be the weakest in the West. Specifically, 29.3% of small business owners located in the South indicated they will increase hiring over the next three months. In comparison, only 12.1% of small business owners in the South indicated they intend to reduce employment. Similarly, 29.2% of owners in the Midwest said they will increase future employment while only 13.3% indicated they will cut back. Finally, 27.5% of business owners located in the Northeast indicated they intend to increase hiring while only 13.0% said they will cut back. In comparison, only 18.4% of business owners in the West indicated they will increase future hiring in the future while an even larger percentage (20.6%) indicated they intend to cut workers.

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