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Opinions and views from expert CFOZone members.

Oct 09

SMIDs prefer technology to employees

Posted by Stephen Taub in jobshiringCashcapital expenditurescapex

Stephen Taub

Small business owners prefer spending money on their company than on people.

According to a new biannual survey which gauges the mood and sentiment of small and medium sized business owners, nearly two-thirds (63 percent) plan to increase capital spending during the next six months. This is up sharply from 49 percent in the spring, according to the PNC Economic Outlook survey.

The business owners say technology equipment spending is their number one priority as they look to maintain their operations without adding additional employees.

The survey found that just 22 percent expect to hire full-time employees, the same percentage as during the spring. However, this is much better than one year ago, when just 17 percent said they expect to bring on new people.

Manufacturing companies are most likely to hire followed by the service industry.

The businesses that do spend money on capital equipment are most likely to use cash on hand. According to the survey, three out of four owners (76 percent compared to 78 percent in the spring) do not intend to seek a new loan or line of credit.

The business owners, however, don't expect things to get much worse. This is partly evident by the fact just 12 percent plan to reduce their workforce compared to 14 percent in the spring and 18 percent one year ago.

Also, the business owners say they do see greater access to financing. Thirteen percent versus nine percent in the spring says it's easier to obtain credit while 44 percent say it's neither easy nor difficult compared to three months ago.

Still, these small and medium-sizes business owners are not exactly an upbeat group. More than nine of 10 (91 percent) believe the US economy has yet to noticeably improve. What's more, 71 percent feel the recovery is more than one year away.

Just 20 percent expect the economy to improve within the next 12 months.

"Until we see a solid pattern of small business hiring and investments re-established, the economic recovery will be a bumpy road, but not another ride over a cliff," said Stuart Hoffman, chief economist for The PNC Financial Services Group. "These findings support PNC's view that the economy will remain transitional for the rest of 2010 and into the first half of 2011."

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