New survey shows confidence among local small businesses
BY JAN WONDRA
Call it the power of positive thinking.
To run a small business in metro Denver these days means that—compared to national averages—you are likely more confident in your business and the economy than small businesses in seven of 15 major metro areas, according to the recent Small Business Sentiment Survey
Some 67 percent of metro small businesses express confidence in both their businesses and the economy at large.
More than 30 percent of Denver respondents think small businesses, not large corporations, are the focus of the Republican tax-reform plan, but little more than 17 percent expect their business to benefit.
“Small business, in particular, is dependent upon how confident consumers feel,” said Lucas Puente, an economist with the Thumbtack Consumer Survey Group, which conducted the survey. “Economic confidence is one of the most important parts in driving economic growth, and growth is overwhelmingly small business—something most people don’t realize.”
The survey, a service of the Bloomberg Professional Platform, takes a monthly read across major U.S. cities, assessing a variety of attitudes related to business and local economic activity.
“When small businesses, consumers and investors feel confident, then more happens—people hire more, they commit to more financing to fuel their growth,” Puente said. “In metro Denver, more than two thirds of small businesses feel positively about their business prospects. That’s a 6.8 percent rise over last month, and this is up 8 percent over a year ago.”
Puente says the mood in the metro area is outpacing the national average.
“Yes, the Denver metro area is even more positive than the national average and the core economic statistics bear that out,” he said. “Of course, one of the most important stats is unemployment. It’s 4.1 percent nationally, but metro Denver sits at 2.2 percent, way below the 3 percent considered full employment.”
Historically, Denver and the state of Colorado have shared similar mood and confidence levels. Puente says he is now seeing a difference.
“The short answer has always been that Denver and the state’s small businesses go hand in hand,” he said. “But the metro area is outperforming the state overall and it is doing much better than rural areas. The difference isn’t huge. Just 67 percent of Denver small businesses and 66 percent of rural small businesses reflect strong confidence, but it is there.”
Puente says the survey design focuses on the health of individual businesses.
“With small businesses, they usually serve a local community, places where they live and work, including localized parts of a metro area,” he said. “So, what’s happening in Denver plays a bigger role on the national scene—while this survey is all about what is happening locally. Take a general contractor with a few employees—they are serving people locally, putting up buildings locally. So, their mood isn’t dependent upon what’s going on in New York or Los Angeles.”
Puente says the survey sounds a few cautionary notes that resonate across Colorado.
“We’re hearing from an increasing number of small-business owners, their frustration with housing costs,” he said. “Housing booms help the building industry, but housing costs affect businesses because it limits access to lower-skilled employees. If housing is prohibitively expensive, the lower-skill employees are being priced out.”
Puente noted that although there is variance by industry, in general small businesses’ wages tend not to keep up with larger corporations. Because they operate locally, they can’t just pick up and move the company like a big business can to find employees or a lower-cost housing environment. Small businesses have to pay the prevailing wage in the area they serve.
The economist pointed to another regional concern—an increasing number of employers struggling to hire at levels they need due to metro Denver’s historically low unemployment rate.
“It’s an increasing challenge,” he said. “Competition for talent is through the roof. The ability to hire new workers is at historically hard levels and yet we’re not seeing a huge uptick in wages. You’d expect it in small-business theory.”
Asked why small businesses aren’t paying higher wages, Puente said companies say they are caught in a bind. While people are asking for higher wages, often they don’t have the skills necessary to offset that wage cost, and small businesses are facing thresholds for what they can charge consumers.
“There is this dichotomy of profit margin,” the economist said. “Most local small businesses aren’t in the business of production of goods. They tend to be in services like healthcare, education, retail, recreation—and they are competing for a local customer base, while big businesses tend to be more in the global wage market, and they’re mobile.”
Overall, Puente said, the outlook for Colorado is very bullish and the role that small businesses play in local economies is growing.
Yes, they are reluctant to move, but when they hire, they do it locally.
“When they are feeling good, it is a strong sign that the local market base is very healthy,” Puente said.