Small Businesses Will Lead Economic Rebound
As markets continue to stabilize, 45% of CEOs interviewed for Pricewaterhouse-Coopers’ Private Company Trendsetter Barometer survey are optimistic about the US economy over the next 12 months (up two points from the previous quarter), and 47% who market abroad are optimistic about the world economy. Additionally, an increasing number plan to raise operational spending over the next 12 months (62%), despite concerns of legislative and regulatory pressures.
The gap in projected revenue growth and hiring for small (less than $100 million in annual revenue) versus large (more than $100 million in annual revenue) private businesses has continued to widen this quarter with smaller firms projecting revenue growth at 11.7% versus 3.9% for large firms; hiring was cited at 56 % versus 34%. However, large private firms are planning for major capital investments at a larger percentage – 33% versus 26% among small firms.
“The higher projected revenue growth rates and hiring for smaller companies versus large companies indicate smaller private companies will lead the economic rebound,” says Ken Esch, partner with PricewaterhouseCoopers Private Company Services practice. “Larger private companies will contribute to economic growth primarily through increased capital investment.”
Despite continued concerns, participating CEOs are optimistic that they won’t finish 2010 on the downside for own-company revenue growth as was the case in 2009, where 41% of Trendsetter companies reported negative growth. In fact, looking ahead over the next 12 months, 71% forecast positive revenue growth for their own companies in 2010, with 38%, primarily small companies, anticipating growth in the double-digits.
Playing catch-up with spending
Private company CEOs’ spending plans for the next 12 months increased 5 points from the previous quarter to 62%, with a majority of this spending attributed to investments in infrastructure, particularly Information Technology, as well as Marketing and Sales. Information technology investments rose 9 points to 28% from the prior quarter. Increased spending on new product or service introductions remained high at 27%.
“Companies are using their increased confidence to catch-up on the capital expenditures they put on-hold in 2009,” adds Mr. Esch. “We’re also seeing that many companies are trying to work with their existing working capital and revolving lines of credit to finance capital expenditures, rather than going to banks for new loans.”