A Higher Degree of You02.10.15
2015 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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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.Interim Dean
John K. Paglia, Ph.D.Associate Dean, Associate Professor of Finance
Cynthia ChiltonDirector of Marketing
Irina ShaykhutdinovaResearch Associate
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• 25 questions• Invite to participate distributed to sample from Dun & Bradstreet Credibility Corp.’s business database
• 3,573 completed responses• Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)
• Responses collected from Jan 20 – Feb 6, 2014
ABOUT THE 2014 ECONOMIC FORECAST SURVEY
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This research was made possible with the support of Dun & Bradstreet Credibility Corp., the leading provider of credit building and credibility solutions for businesses.
DUN & BRADSTREET CREDIBILITY CORP.
Jeffrey StibelChairman and Chief Executive Officer
Judy Hackett, Chief Marketing Officer
Aaron StibelSenior Vice President, Technology
Heather HerndonDirector, Marketing and Communications
Brenda GaryVice President, Marketing Operations
Lauren SimpsonMarketing and Communications Manager
Bernice BrennanManager, Creative Services & Marketing Communications
Trenice TaylorMarketing Manager
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2015 ECONOMIC FORECAST
Projections in January 2015 Projections in January 2014
Whole sample <$5 million $5‐$100
millionWhole sample <$5 million $5‐$100
million
This year US GDP 1.1% 1.1% 1.6% 0.6% 0.6% 1.2%
Next year US GDP 1.6% 1.6% 2.0% 1.2% 1.1% 1.7%
Probability of US recession in the next year 25.5% 25.8% 22.1% 29.2% 29.9% 23.0%
S&P 500 4.4% 4.4% 5.1% 2.8% 2.8% 3.5%
US Unemployment Rate (12/31) 6.1% 6.1% 6.1% 7.7% 7.7% 7.1%
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CONFIDENCE IN GDP GROWTH PROJECTIONS
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0%
20%
40%
60%
80%
100%
Very unsure Somewhatunsure
Neitherconfident not
unsure
Somewhatconfident
Very confident
10% 10%
34% 38%
8%
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CONFIDENCE IN BUSINESS GROWTH PROSPECTS COMPARED TO ONE YEAR AGO
2015 VERSUS 2014 RESPONDENTS
8
0%20%40%60%80%
100%
More confident Somewhat moreconfident
Neither morenor lessconfident
Somewhat lessconfident
Less confident
2015 35% 31% 22% 7% 6%2014 27% 29% 24% 10% 11%
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Impediments
Most Influential Least Influential
Respondents in 2015Respondents in 2014
Respondents in 2015Respondents in 2014Whole
sample<$5
million $5‐$100 million
Whole sample
<$5 million
$5‐$100 million
Limited access to capital 24% 25% 15% 19% 40% 39% 54% 41%
Government regulations (tax, healthcare) 38% 37% 46% 43% 15% 16% 10% 16%
Global political and/or economic environment 27% 27% 23% 33% 9% 9% 7% 6%
Domestic (U.S.) economic and/or political environment 18% 17% 21% 14% 29% 29% 24% 28%
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
January2015
January2014
January2013
January2012
January2011
This year US GDP (Q4/Q4) 1% 0.6% 0.4% 0.7% 2.0%
Next year US GDP (Q4/Q4) 2% 1.2% 0.9% 1.9% 2.5%
US Unemployment Rate (12/31/2012) 26% 7.7% 8.0% 8.7% 9.1%
US Housing prices (Q4/Q4) n/a 2.8% 3.0% ‐0.8% ‐1.8%
S&P 500 (Q4/Q4) 4% 4.0% 3.4% 2.5% 6.5%
Probability of US Recession in 2012 6% 29.2% 36.2% 32.0% 28.4%
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PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE
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0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
53% 51%
78%
52% 48%
74%
2015 2014
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PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS
12
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
60% 58%77%
58% 55%
79%
2015 2014
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PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX
13
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
18% 18%15%
12% 13% 8%
2015 2014
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PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE
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0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
43% 43%41%
57% 58%49%
2015 2014
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PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR
15
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
47% 46%58%
42% 41%52%
2015 2014
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PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR
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0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5‐$100 million
47% 46%58%
42% 41%52%
2015 2014
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POLICIES TO HELP SPUR U.S. JOB CREATION
17
0%
20%
40%
60%
80%
100%
Regulatory reform Tax incentives Increased access tocapital
Education reform Increased competitiveposition with foreign
trade partners
Repeal or ModifyAffordable Care Act
2015 13% 23% 23% 8% 9% 23%2014 13% 19% 22% 6% 8% 32%2013 28% 28% 26% 6% 13%2012 28% 21% 30% 5% 15%2011 17% 19% 44% 14%
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POLICIES SUPPORTED IN 2015
18
30%
82%
59%27%
43%
54%
33%
28%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Raising the debt ceiling when limit is reached in…
Balanced US Budget
Comprehensive immigration reform with a path…
Democrats retaining control of the Senate in…
Repeal of the Affordable Care Act
Significant Reform of the Affordable Care Act
Continuation of "Quantitative Easing" by Federal…
Congress continuing to extend long‐term…
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DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION
19
Less than or equal to 1011 - 2526 - 5051 - 7576 - 100101 - 150151 - 200more than 200
CA
OR
WA
MT ND MN
ID WY
SD
NV UT
AZ
CO
NM
TX
NE
KS
OK AR
LA MS AL
FL
GA
TN SC
NC
VA WV KY MO
IL IA
WI MI
IN OH
MD
PA NJ
NY
ME
NH VT MA RI
CT
HI AK
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DETAILS ABOUT THE RESPONDENTSINDUSTRY
20
33%
10%10%7%
6%6%
5%5%
4% 4% 3% 3% 1%3% ServicesConstructionRetail tradeFinance & real estateManufacturingInformation technology or servicesHealth careForestry, fishing, hunting or agricultureEducational servicesArts, entertainment or recreationWholesale tradeTransportation and warehousingUtilities & miningUnclassified establishments
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DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES
21
6% 7% 4%6%7%
12%
15%12%
9%
8%6%
2% 2%
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
22
4%2% 2% 3% 3% 3%
5%2% 3%
26%
10%
6%8%
4% 5% 5%2% 2%
6%2.5%
0%
5%
10%
15%
20%
25%
30%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M
23
5%2% 2% 3% 3% 3%
4%2% 3%
27%
10%
6%8%
4% 4% 4%2% 2%
6%
2.2%
0%
5%
10%
15%
20%
25%
30%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M
24
1% 1% 1%2%
1%
6%
4% 4%
16%
13%
7%
17%
7%8%
7%
3%2% 2%
6.4%
0%2%4%6%8%
10%12%14%16%18%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE
25
1% 1% 1% 1% 1% 1%3%
1% 1%
21%
14%
11% 11%
6% 7%5%
3% 3%
9% 9.7%
0%
5%
10%
15%
20%
25%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M
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1% 1% 1% 1% 1% 1%3%
1% 1%
21%
13%
10% 11%
6%7%
5%3% 3%
9% 9.9%
0%
5%
10%
15%
20%
25%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M
27
1% 1% 1% 1%
3%2% 2%
18%16%
11%
14%
11%
6%4%
3%2%
6%
9.0%
0%2%4%6%8%10%12%14%16%18%20%
Decline Increase
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DETAILS ABOUT THE RESPONDENTSANNUAL INCOME
28
10%13%
7%
9%
15%
16%
13%
7%4%
2%1%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 RESPONDENTSFIRM AGE
29
6% 8%8%
11%
14%20%
33%
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 RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES
30
11%
48%19%
9%4% 9% 0 1‐2
3‐5 6‐10
11‐15 More than 15
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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 Graziadio School of Business and Management at Pepperdine University 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 5+ Southern California campuses, Northern California campus, 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, Presidential and Key Executives MBA and executive education certificate programs. Follow the Graziadio School atwww.facebook.com/pepperdine.graziadio and https://twitter.com/graziadioschool
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Thank YouCraig Everett, Ph.D., MBA
Director,Pepperdine Private Capital Markets
Projecthttp://bschool.pepperdine.edu/privatecapital