Entrepreneurial

Few small businesses plan to hire

November 9, 2011

Many small business owners in the United States are reluctant to hire more employees in the near term as economic uncertainty and sagging sales continue to put pressure on company balance sheets, the latest index on small business optimism from the National Federation of Independent Business (NFIB) shows.

Of the 2,077 small businesses in NFIB’s membership surveyed, the number of companies planning to increase staff is down two percentage points to just nine percent, while 12 percent plan to reduce their workforce over the next three months. The report also shows employment has been reduced for the fifth month in a row with an average reduction of 0.1 workers per company.

“Small businesses seem to have the right number of employees,” said Holly Wade, senior policy analyst at the NFIB. “They’re breaking even. But until they see a pick-up in consumer spending there’s no reason to hire.”

Economic uncertainty is affecting consumer confidence and in turn small businesses. Twenty-six percent of business owners surveyed said poor sales are their main concern.

Wade doesn’t see anything inspiring more consumer confidence in the near future. “We don’t see anything on the horizon that would get small businesses to hire more and consumers to spend more,” she said.

At the same time, Sageworks has seen an increase in private company profit per employee with average profit per employee rising by 50 percent since 2009. The profit per employee has so far been $15,000 this year.

“Private companies have seen revenue growth between four to six percent,” said Libby Bierman, an analyst with Sageworks. “The companies are growing, but they’re not adding a lot of employees.”

Bierman believes businesses are being very careful when it comes to any big investments such as increasing their staff.

“They’re testing their growth,” says Bierman. “Until they feel sure they won’t make this investment (hiring more employees).”

Courtesy of Sageworks Inc.

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