Despite obstacles they may face, and with fewer resources at their disposal than large corporations, small businesses have never been short of optimism. In fact, Capital One’s latest Small Business Growth Index found that more than half of small business owners expect the coming year to be profitable.
While those entrepreneurs and business leaders did express their concerns about challenges like taxes, technology, and diversity, they were largely confident about the profitability of their companies. Those positive feelings have been growing, with 62% reporting that their current business conditions were “good” or “excellent” compared to only 50% last year.
Let’s take a closer look at what keeps business owners continually viewing the glass as half full.
Planning ahead for tax reform
Johannes Endhardt, vice president of Strategy, Marketing and Analytics for Capital One’s National Small Business Bank, notes that the conversation around tax reform has ultimately helped drive optimism for entrepreneurs. “While our survey showed that small business owners are unsure how tax reform will impact them, those who think they will save money are making plans for how to use it,” he says.
The survey goes on to state that of the 36% of small business owners who believe they will pay less in taxes, many plan to reinvest the money they save to grow their businesses. The top three areas where funds are anticipated to be reinvested include purchasing new equipment (49%), contributing to business savings (47%), and raising employee wages (47%).
While the Tax Cuts and Jobs Act, which was signed into law in 2017, continues to make small business owners uncertain about the benefits of tax reform, 46% surveyed say they support the tax plan, with 43% believing the new tax law will make it easier to file taxes, and 46% enjoying being able to write off additional purchases. In addition, an overwhelming 85% expect changes will lead to economic growth.
Investing in technology
Last year’s 2017 Small Business Growth Index survey revealed small business owners were concerned about keeping up with technology; 32% of entrepreneurs considered it to be one of their top challenges. This was compounded due to the development of new technologies like mobile payments, cybersecurity threats, and even the lack of basic technology connected to small businesses like websites (which 36% of small business owners didn’t have).
In 2018, 39% of small business owners harbor a concern that tech will eventually grow to a point where it replaces certain jobs or prevent businesses from hiring. However, these entrepreneurs are increasingly investing in tech in order to better grow their businesses; 65% of small business owners believe that advancements in technology are making it easier to streamline business operations. Millennial small business owners have especially adapted to new technology, with 81% stating that it has made it easier for them to manage their businesses.
Even more interesting is the connection between adapting to new technology and the likelihood of hiring new employees. Thirty-three percent of those surveyed have plans to hire in the next six months, thanks to technological advancements, versus 17% of small business owners who have not invested in technology.
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The power of a diverse workforce
When it comes to diversity in hiring, the survey found that 47% of small business owners with at least one employee believe a diverse workforce is important for their company’s profitability and growth. And 65% of those business owners who value a diverse workforce also believe their financial position will improve within six months, as opposed to 49% of small business owners who do not think diversity will aid their growth.
The Small Business Growth Index also reveals that 79% of small business owners are already paving the way by employing a diverse workforce. A benefit of diversification is when many individuals from varying backgrounds, genders, and experiences join a team and share their insights, the company’s end product may become applicable to a much wider audience. Small business owners also benefit from expansive hiring when they are able to learn new ideas and strategies from workers who can offer fresh perspectives.
As we head into the second half of 2018, and are seeing support for the new tax reform plan, an increased investment in technology, and the hiring of a more diverse work force, it’s refreshing to see the positive impact of these areas on small business optimism. In addition, 51% of small business owners also feel their financial position will improve within the next six months, ultimately helping to shape 2018 into a strong year for entrepreneurs and businesses everywhere.