Survey: California Small Businesses report lower profits, mo

 

Tuesday, Mar 10,2009, 2:30:20 PM   Click:

Copyright: Business Wire
Source: Business Wire
Wordcount: 1000

Business Editors

SAN FRANCISCO - (BUSINESS WIRE) - March 9, 2009 - California small business owners are turning resolutely pessimistic, saying that their plan to reduce spending and jobs this year and they hope that government intervention will help survive 2009, according to Union Bank of the ninth annual survey of small business today.

The investigation showed the highest rate of pessimism, and the lowest level of optimism, its history. The percentage of owners pessimists - those who anticipate a decline in profits - doubled to 24 percent from 12 percent last year and only 4 percent in 2007. Although 34 percent of owners say they are optimistic that profits will improve this year, they are much fewer than the 52 percent who were optimistic last year.

Challenges and opportunities

The owners said their biggest challenges is the deterioration of the state and national economy and the burden of state and national taxes. Respondents said they need the Obama Administration to focus more on small business tax cuts, lowering health care costs and creating tax incentives to encourage small businesses to invest in the creation of jobs.

"I am not surprised by these results is what I heard almost daily from many of our customers in their efforts to maintain their operations afloat," said Joseph Benoit, Union Bank Small banking executive. "At the same time, I also see the optimism and prosperity of entrepreneurship in small businesses. Like everyone else, they are suffering from some form of assistance and the search can be for the state and federal assistance to survive. "

The federal government economic stimulus package that was negotiated during the investigation, should offer some of the assistance that California, small business owners looking for. The White House believes that the American and Reinvestment Act which was signed into law in mid-February to save or create 369,000 jobs in California, and that an estimated $ 476 billion of the package will be different types of state, federal and local tax relief, with another $ 59 billion for health care initiatives.

Cost Control

Yet most small business owners say they will reduce their staff and reduce their capital expenditures in 2009 than at any time of the survey's history.

Although 15 percent of the owners of this year planning to add jobs and growth of their staff by an average of 24 percent, the lowest figure in the investigation in its history. A 14 percent plan job cuts this year and say they will reduce head count by an average of 22 percent. This compares to 19 percent of the layoffs that reported last year, although only 6 percent anticipated reductions in early 2008.

The percentage of owners planning to reduce their capital expenditure in 2009 has almost doubled, reaching 22 percent compared to 12 percent last year. Another 60 per cent to capital expenditures constant, while 17 percent plan an increase - well below 26 percent who planned an increase last year and 35 percent in 2007.

The owners say they will continue with other cost control: reduction of operating costs (55 percent), debt reduction (40 percent) and lower costs of negotiation with suppliers (38 percent).

"Small businesses in California - and across the country - are facing this downturn by controlling costs that are within their reach. It is a good strategy for alteration in 2009, "said Aida Alvarez, former head of the Small Business Administration during the Clinton administration.

"The report shows that the year 2008 has been to accept the downside. 2009 is now a matter of survival. Maybe 2010 will be around for cautious optimism, "said Benoit.

Other highlights of the survey

• Owners say the main reasons to do business in California is the state of climate, growth opportunities and family ties. These were the three main advantages listed by the owners of each of the nine surveys.

• 38 percent reported increases in sales in 2008, down from 51 percent in 2007. The average increase was 22 percent.

• Another 38 percent of sales decreased in 2008, against 25 percent the previous year. The average reduction was 21 percent.

• 26 percent were able to increase their prices in 2008, while 62 percent reported a combination of rising and declining prices.

• 46 percent of owners report offering health care benefits for employees, up 1 percent from the previous year. Half of these owners say health care costs have no effect on their activities.

• Of the 54 per cent of owners who do not provide health insurance for workers, 89 percent have never offered the benefit, the balance to relinquish the benefits five years ago.

• 65 percent say their workers' compensation premiums have not changed in 2008.

• 58 percent offer paid vacation, down 4 percent from the previous year. Most report replacement of paid leave with benefits.

• 43 percent by using recycled materials in the workplace and 31 percent installed energy efficient equipment. Another 29 percent said they took no action to be more environmentally friendly.

About the survey

Union Bank surveyed more than 2,000 small business owners throughout California from January 12 - 23, 2009. Businesses, defined for the survey 15 million or less in annual sales, were a mixture of bank customers and non-clients. Business owners interviewed working an average of 13.7 individuals and companies were on average 17.8 years.

About Union Bank

Based in San Francisco, UnionBanCal Corporation is a financial holding company with assets of $ 70.1 billion at December 31, 2008. Its principal subsidiary, Union Bank, NA is a full service commercial bank offering a range of financial services to individuals, small businesses, middle market businesses and large enterprises. Union Bank of California is the fifth largest bank by deposits. The bank has 335 banking offices in California, Oregon and Washington and two international offices. Effective 4 November 2008, UnionBanCal Corp. is a wholly owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd. www.unionbank.com Visit for more information.



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