Philly Inc: Confident and uncertain? Both are possible
Are small-business owners feeling more confident now than they did a year ago, or more uncertain about the future? The answer is “yes.” To both.
Are small-business owners feeling more confident now than they did a year ago, or more uncertain about the future?
The answer is "yes." To both.
But Rafael Pastor, chairman and chief executive officer of Vistage International Inc., a San Diego-based business-consulting firm with chapters around the world, including Philadelphia, said those are not mutually exclusive conditions for small-business owners.
Entrepreneurs are, by their nature, self-confident and optimistic. Without such qualities, they couldn't expect to shoulder the risks involved in any new venture, according to Pastor. So when Vistage's most recent CEO Confidence Index indicated a strong rebound in confidence since the third quarter of 2011, I wasn't surprised.
But I am perplexed when surveys try to describe the effects of uncertainty on business plans. After all, running any business means dealing with all sorts of uncertainty. And how can you be supremely confident and hugely uncertain at the same time?
In an interview last week, Pastor had an answer for that. "Confidence and uncertainty are not irreconcilable things," he said.
Confidence emerges from what CEOs think they can control: sales growth, investment, business expenses. Uncertainty involves political and economic unknowns that the owner of a small or medium-sized business feels are out of his or her hands, Pastor said.
That's why 26 percent of the 1,854 respondents to Vistage's CEO Confidence Index survey for the first quarter of 2012 cited "economic uncertainty" as their most significant current business issue, compared with the 18 percent who picked "staffing" and the 13 percent who chose "financial issues."
On the political front, the gridlock in Washington over so many budget issues, as well as the outcome of the presidential election, rank as major uncertainties that affect the direction of taxes and regulation, Pastor said. The sheer number of question marks has remained high domestically and internationally, including Europe's persistent debt crisis and China's economic cooldown.
There was some good news in the Vistage survey: 57 percent of CEOs expect that their total number of employees will increase in the next 12 months.
Since 2003, the Vistage survey of its 15,000 small and medium-sized business members has been a good gauge of where small-business hiring is headed, Pastor said. So with a majority expecting to hire, he said that such job creation should manifest itself in the employment numbers in two to three quarters.
Sounds good, right? Except, as Pastor pointed out, that same survey found that 84 percent of the CEO respondents replied "yes" when asked: Have you learned how to make your business more productive with fewer employees?
That suggests small employers will not hire back to the levels they once had any time soon, Pastor said.
Contact Mike Armstrong at 215-854-2980 or firstname.lastname@example.org, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.