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A Higher Degree of You02.23.16
2016 Economic Forecast: Insights from Small and Mid-Sized Business Owners
Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project
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© 2012-2016 Pepperdine University. All rights reserved. Pepperdine Private Capital Access Index (“PCA Index”) is a trademark of Pepperdine University. PCA Index content is the intellectual property of Pepperdine University or its third party content providers. Any copying, republication or redistribution of PCA Index content, including but not limited to caching, framing or similar means, is expressly prohibited without the prior written consent of Pepperdine University. Pepperdine University shall not be liable for any errors, omissions or delays in PCA Index content, or for any actions taken in reliance thereon.
PUBLISHED BY
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ACKNOWLEDGEMENTS
I’d also like to thank the following people at The Graziadio School of Business and Management for their contributions:
David M. Smith, Ph.D.Dean
John K. Paglia, Ph.D.Associate Dean, Associate Professor of Finance
Lisa PerryDirector of Marketing & Communications
Irina ShaykhutdinovaResearch Associate
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• 25 questions• Invite to participate distributed to sample from Dun & Bradstreet’s business database
• 2,469 completed responses • Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)
• Responses collected from Feb 2 – Feb 19, 2016
ABOUT THE 2016 ECONOMIC FORECAST SURVEY
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This research was made possible with the support of Dun & Bradstreet.
DUN & BRADSTREET
Jeffrey StibelVice Chairman
Judy HackettChief Marketing Officer
Aaron StibelChief Technology Officer
Heather HerndonDirector, Marketing and Communications
Lauren SimpsonMarketing and Communications Manager
Bernice BrennanDirector, Creative Services
Ben PollockMarketing Manager
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2016 ECONOMIC FORECAST
Projections in January 2016 Projections in January 2015
Whole sample <$5 million $5-$100
millionWhole sample <$5 million $5-$100
million
This year US GDP 0.4% 0.4% 0.5% 1.1% 1.1% 1.6%
Next year US GDP 1.3% 1.3% 1.1% 1.6% 1.6% 2.0%
Probability of US recession in the next year 32.5% 32.8% 29.9% 25.5% 25.8% 22.1%
S&P 500 0.9% 1.1% 0.0% 4.4% 4.4% 5.1%
US Unemployment Rate (12/31) 6.3% 6.4% 5.6% 6.1% 6.1% 6.1%
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CONFIDENCE IN GDP GROWTH PROJECTIONS
7
Very unsure
Somewhat unsure
Neither confident not unsu
re
Somewhat confident
Very confident
0%20%40%60%80%
100%
12% 11%34% 34%
8%12% 11%
33% 34%
9%13% 10%
40% 32%
5%
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CONFIDENCE IN BUSINESS GROWTH PROSPECTS
8
More confident Somewhat more confident
Neither more nor less confident
Somewhat less confident
Less confident0%
20%
40%
60%
80%
100%
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Impediments
Most Influential Least Influential
Respondents in 2016Respondents in 2015
Respondents in 2016Respondents in 2015Whole
sample<$5
million $5-$100 million
Whole sample
<$5 million
$5-$100 million
Limited access to capital 26% 28% 12% 24% 41% 38% 59% 40%
Government regulations (tax, healthcare) 35% 34% 41% 38% 15% 16% 10% 15%
Global political and/or economic environment 23% 22% 26% 27% 9% 9% 7% 9%
Domestic (U.S.) economic and/or political environment 23% 23% 24% 18% 28% 29% 18% 29%
THE MOST AND THE LEAST INFLUENTIAL IMPEDIMENTS TO U.S. GDP GROWTH NEXT YEAR
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CHANGES IN ECONOMIC FORECAST OVER THE YEARS
January2016
January2015
January2014
January2013
January2012
January2011
This year US GDP (Q4/Q4) 0.4% 1% 0.6% 0.4% 0.7% 2.0%
Next year US GDP (Q4/Q4) 1.3% 2% 1.2% 0.9% 1.9% 2.5%
US Unemployment Rate (12/31/2012) 6.3% 26% 7.7% 8.0% 8.7% 9.1%
US Housing prices (Q4/Q4) 0.9% n/a 2.8% 3.0% -0.8% -1.8%
S&P 500 (Q4/Q4) 32.5% 4% 4.0% 3.4% 2.5% 6.5%
Probability of US Recession in 2012 0.4% 6% 29.2% 36.2% 32.0% 28.4%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS BY SIZE
11
0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 51-75 76 - 100
101 - 200
0%
5%
10%
15%
20%
25%
30%
35%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE UNDER $5 MILLION
12
0 1-2 3-5 6-10 11-15 16-20 21-300%
20%
40%
60%
80%
100%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE BETWEEN $5 MILLION AND $100 MILLION
13
0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 More than 50
0%
20%
40%
60%
80%
100%
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PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE
14
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
52% 48%
74%
53% 51%
78%
56% 51%
69%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS
15
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
58% 55%
79%
60% 58%
77%65% 62%
80%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX
16
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
12% 13% 8%18% 18% 15%
22% 23% 17%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE
17
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
57% 58%49%
43% 43% 41%49% 49% 46%
2014 2015 2016
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PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR
18
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
42% 41%52%47% 46%
58%47% 46%
59%
2014 2015 2016
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PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR
19
Whole sample <$5 million $5-$100 million0%
20%
40%
60%
80%
100%
60% 60% 63%68% 68% 69%71% 72% 69%
2014 2015 2016
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POLICIES TO HELP SPUR U.S. JOB CREATION
20
0%20%40%60%80%
100%
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POLICIES SUPPORTED IN 2016
21
Raising the debt ceiling when limit is reached in early March
Balanced US Budget
Comprehensive immigration reform with a path to citizenship
Democrats retaining control of the Senate in November
Repeal of the Affordable Care Act
Significant Reform of the Affordable Care Act
Continuation of "Quantitative Easing" by Federal Reserve
Congress continuing to extend long-term unemployment benefits
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
75%
82%66%
32%
48%
55%
34%
28%
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CANDIDATES FOR U.S. PRESIDENT WHICH OFFER THE BEST POLICIES FOR SMALL BUSINESS ACORDING TO RESPONDENTS
22
Donald Tru
mp
Hilary
Clinton
Bernie Sanders
Ted Cruz
John Kasich
Marco
Rubio
Jeb Bush
Ben Carson
Other
0%
20%
40%
60%
80%
100%
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DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION
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DETAILS ABOUT THE RESPONDENTS INDUSTRY
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28%
13%9%8%7%
7%
6%5%
4%3%3%2% 1% 2% Services
ConstructionRetail tradeFinance & real estateManufacturingInformation technology or servicesTransportation and warehousingHealth careWholesale tradeEducational servicesArts, entertainment or recreationForestry, fishing, hunting or agricultureUtilities & miningUnclassified establishments
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DETAILS ABOUT THE RESPONDENTS ANNUAL REVENUES
25
7% 5%3%
4%7%
10%15%
11%10%
9% 8%4% 3%1%
1% 3% $0 or pre-revenue stage$1 - $5,000$5,001 - $10,000$10,001 - $25,000$25,001 - $50,000$50,001 - $100,000$100,001 - $250,000$250,001 - $500,000$500,001 - $1,000,000$1,000,001 - $2,000,000$2,000,001 - $5,000,000$5,000,001 - $10,000,000$10,000,001 - $25,000,000$25,000,001 - $50,000,000$50,000,001 - $100,000,000$100,000,001 - $500,000,000
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE
26
> 50%
41-50
%
31-40
%
21-30
%
16-20
%
11-15
%6-1
0% 4-5%
2-3%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%
5%
10%
15%
20%
25%
5%2% 1%
3% 3%2%
3% 2% 3%
23%
11%
6%
10%
5% 5% 4%3% 3%
6%4%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M
27
> 50%
41-50
%
31-40
%
21-30
%
16-20
%
11-15
%6-1
0% 4-5%
2-3%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%
5%
10%
15%
20%
25%
5%
2% 2%3% 3%
2%3%
2% 3%
23%
11%
5%
9%
5% 5% 4%3% 3%
7%
3%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M
28
21-30
%
16-20
%
11-15
%6-1
0% 4-5%
2-3%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%2%4%6%8%
10%12%14%16%18%20%
2%5%
2% 3% 4%2%
18%
11%
6%
14%
6%8% 7%
5%
1%
5%
8%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE
29
> 50%
41-50
%
21-30
%
16-20
%
11-15
%6-1
0% 4-5%
2-3%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%2%4%6%8%
10%12%14%16%
2%1% 1% 1% 2% 2% 1% 1%
15%13%
11%12%
7% 7% 7%
4% 3%
10%12%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M
30
> 50%
41-50
%
21-30
%
16-20
%
11-15
%6-1
0% 4-5%
2-3%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%2%4%6%8%
10%12%14%16%
2%1% 1% 1% 2% 2% 1% 1%
14%13%
10%
12%
6%7%
7%
4% 4%
12% 12%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M
31
> 50%
21-30
%
16-20
%6-1
0% 4-5%
Stayed flat
2-3%
4-5%
6-10%
11-15
%
16-20
%
21-30
%
31-40
%
41-50
%> 50%
Avera
ge0%2%4%6%8%
10%12%14%16%18%
1% 1%2%
4%1%
16%
12%
15%
11% 12%
7%9%
4%
1%
4%
9%
Decline Increase
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DETAILS ABOUT THE RESPONDENTS ANNUAL INCOME
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10%9%
6%
9%14%17%
15%
7%5% 3%
2%1% 1%1% Negative (net loss)$1 - $5,000$5,001 - $10,000$10,001 -$25,000$25,001 - $50,000$50,001 - $100,000$100,001 - $250,000$250,001 - $500,000$500,001 - $1,000,000$1,000,001 - $2,000,000$2,000,001 - $5,000,000$5,000,001 - $50,000,000$50,000,001 - $100,000,000Greater than $100,000,000
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DETAILS ABOUT THE RESPONDENTS TOTAL BUSINESS ASSETS
33
3%10% 8%
9%
10%12%11%9%
8%6% 6%
3%2% 5%
$0 $1 - $5,000
$5,001 - $10,000 $10,001 - $25,000
$25,001 - $50,000 $50,001 - $100,000
$100,001 - $250,000 $250,001 - $500,000
$500,001 - $1,000,000 $1,000,001 - $2,000,000
$2,000,001 - $5,000,000 $5,000,001 - $10,000,000
$10,000,001 - $25,000,000 Greater than $25,000,000
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DETAILS ABOUT THE RESPONDENTS FIRM AGE
34
9% 8%7%
10%
18%20%
28%
Less than 1 year
At least 1 but less than 2
At least 2 but less than 3
At least 3 but less than 5
At least 5 but less than 10
At least 10 but less than 20
20 or more
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DETAILS ABOUT THE RESPONDENTS NUMBER OF FULL-TIME EMPLOYEES
35
8%
46%19%
10%4% 13%
0 1-2 3-5 6-10
11-15 More than 15
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DETAILS ABOUT THE RESPONDENTS NUMBER OF PART-TIME EMPLOYEES
36
43%
33%
13%5%2%
4%
0 1-2 3-5 6-10
11-15 More than 15
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DETAILS ABOUT THE RESPONDENTS PRIMARY BUSINESS ACTIVITY
37
32%
68%
Sales Service
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DETAILS ABOUT THE RESPONDENTS PERCENTAGE OF CERTIFIED WOMEN-OWNED BUSINESSES
38
Whole sample < $5 million $5 million -$100 million0%
20%
40%
60%
80%
100%
19% 20%10%
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About Pepperdine Private Capital Markets ProjectThe Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management is the first simultaneous, comprehensive, and on-going investigation of the major private capital market segments. The research seeks to understand the true cost of private capital across market types and the investment expectations of privately-held business owners; providing lenders, investors and the businesses that depend on them with critical data to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized. Download reports and find more information at http://bschool.pepperdine.edu/privatecapital. About Pepperdine University’s Graziadio School of Business and Management A leader in cultivating entrepreneurship and digital innovation, the Pepperdine University Graziadio School of Business and Management focuses on the real-world application of MBA-level business concepts. The Graziadio School provides student-focused, globally-oriented education through part-time, full-time, and executive MBA programs at our five Southern California locations and Silicon Valley, Santa Barbara, and Dallas campuses as well as through online and hybrid formats. In addition, the Graziadio School offers a variety of master of science programs, a bachelor of science in management degree-completion program, and the Presidents and Key Executives MBA as well as executive education certificate programs. Follow the Graziadio School on Facebook (www.facebook.com/pepperdine.graziadio), Twitter at @GraziadioSchool (https://twitter.com/graziadioschool) and LinkedIn (https://www.linkedin.com/edu).
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Thank YouCraig Everett, Ph.D., MBA
Director, Pepperdine Private Capital Markets Projecthttp://bschool.pepperdine.edu/privatecapital