SBDC Survey Show Cautious Economic Optimism by State Businesses

PULLMAN, Wash. — In the face of the Asian monetary crisis, a volatile stock market, and uncertainty in the aerospace industry, seven out of 10 owners of small and midsize businesses in Washington are preparing to stay the course.
A survey of Washington business owners and managers found that 71 percent see the state’s economy as either staying the same or expanding. The statewide survey, conducted by the Washington State University Small Business Development Center, seeks to determine the assumptions entrepreneurs employ when planning their business operations for the coming year.
“When we consider that the state’s economy has grown to record proportions over the past year, the continued economic optimism of the small and midsize business community is remarkable,” noted Stuart Leidner, SBDC coordinator for research and innovation. “With an already robust economy and recent uncertainty, we wondered whether or not business owners would see the state’s economic pendulum beginning to swing the other way.”
Business owners predicting an expanding economy dropped to 40 percent in the current survey from a high of 70 percent for 1997 and 58 percent for 1998. Part of this drop is offset by an increase to 31 percent, from last year’s 22 percent, in the number of respondents who see the state economy remaining the same.
“Given an economy in which further expansion may be hard to imagine, this shift in responses is understandable,” Leidner said. “In this context, a ‘stay the same’ response should be considered as positive.”
“However,” he added, “we should not ignore a significant increase in the number of respondents who are predicting a decline in the state’s economy. Businesses predicting a declining economy rose to 17 percent from last year’s 3 percent.”
Much of the optimistic response to the survey question came from businesses in Central Washington and the urban region of King, Pierce and Snohomish counties. The highest pessimistic response rate came from eastern Washington and the western counties outside of the urban region. Those western counties provided the widest diversity of responses by returning the highest expansion predictions (42 percent) and one of the highest declining economy predictions (24 percent).
Past surveys found that business owner predictions for their local economies tend to be more optimistic than their predictions for the state economy, and this year’s survey is no exception. The current survey found 51 percent predicting an expanding local economy (down from 65 percent last year), 32 percent predicting their local economies will stay the same (up from 24 percent last year) and 12 percent predicting a decline (up from 6 percent). Businesses in urban and western Washington were most optimistic about their local economies; however, differences between the regions were not as pronounced as their state level responses.
As in past years, the survey also asked business owners to identify the most important problem they will face in the coming year. Leidner noted that this year’s responses “may reflect the growing pressures confronting businesses as they try to operate in a highly charged economy.”
Personnel management clearly remained the most important problem facing business owners in the coming year. Nearly one-quarter (24 percent) of the respondents cited this as their primary concern. This is the second year that personnel issues topped their list of problem areas, reflecting the continued pressures faced by small and midsize businesses in a high employment, tight labor market. Handling day-to-day business operations was the second most frequently cited problem (12 percent), followed by attracting new customers (10 percent). Both of these categories increased in importance from last year’s survey.
Each year the business survey asks one or two questions that are unique to current issues. This year respondents were asked about the impact of the minimum wage increase on their businesses. Eighty percent of the respondents said there would be no impact, while 13 percent predicted a negative impact and 7 percent predicted a positive impact.
When asked if they are taking any steps to solve potential Year 2000 computer problems in their businesses, respondents were split almost evenly, with 52 percent answering “yes” and 48 percent answering “no.” When asked if they were aware of whether or not their vendors or suppliers had prepared for Year 2000 computer problems, 56 percent said “no” and 48 percent said “yes.”
In its 12th year, the Washington State Small Business Forecast looks at how small business owners and managers perceive economic conditions for the coming year. The SBDC’s Lead Center at WSU interviewed 805 randomly selected businesses in the state from
Nov. 19-Dec. 4.
Leidner said learning how small business owners view the coming year provides some indication of how they will plan their business activities. The results allow the SBDC to better plan its small business counseling activities and training programs.
The Washington SBDC, part of WSUÕs College of Business and Economics, is the lead office for 23 education and 24 counseling centers statewide. These centers provide small business counseling, training and research services in conjunction with the U.S. Small Business Administration and the Economic Development Administration.