Entrepreneurs worried about the economy
Jeff is the Jack C. Massey Chair in Entrepreneurship and Director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn.
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Overall, 68% of small business owners surveyed say the economy stresses them out (on par with January 2009 results). 38% say their greatest concern is a prolonged recession/"double dip" and 32% list high unemployment.
They are right worry about both of these problems, but they also better start paying attention additional problems that are likely to raise their ugly heads very soon. I have been beating the drum about inflation and interest rate spikes for some time. Now I am beginning to hear bankers start to quietly warn their clients about a sharp increase in prime rates. I have heard estimates of between 3 to 8 basis point increases by the end of 2011.
The good news is that small business owners have not taken on more debt, which will make them vulnerable to any interest rate spike should it happen anytime soon. Almost 60% of small business owners have not pursued credit in the last 6 months. Of that group, 22% worry about default or bankruptcy and 30% say there isn't enough demand for their products or services to warrant taking on new debt.
What is keeping them from expanding their workforces and helping to turn things around in the economy? Customer demand is by far the greatest single incentive to hire (42%), compared to tax credits (11%) or access to financing (5%).
Overall, small business owners are more optimistic about the economy than they were one year ago (43% think it will improve over the next 12 to 18 months versus 30% in January 2009). But then again, they are entrepreneurs so by their nature they are going to try and see the positive whenever they can.
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