Survey: Small Businesses Plan for Contingency; Expect Cutbacks in 2009

Many small business owners say that they’re prepared to eliminate some positions or reduce the number of hours employees work as part of their contingency planning for 2009, according to a recent survey.

Almost half of the small businesses surveyed in the most recent Wells Fargo/Gallup Small Business Index in November 2008, said they have developed a contingency plan in case their company’s financial health declines. Fifty-eight percent of those businesses said they would reduce employee hours and 51 percent said they would eliminate some positions if they needed to act on their contingency plans.

While small businesses consider what to do in the case of a slowing economy, owners are also thinking positively about their priorities for the coming year. Nearly all respondents said that finding new ways to operate more efficiently was a high priority in 2009 (90 percent).

Eighty-nine percent of business owners said they want to increase their sales and revenue, while almost 60 percent said that expanding their businesses to reach more customers is a high priority for 2009.

Fifty-eight percent said they have prioritized creating new or improved products or services.

Most business owners plan to implement their 2009 plans without adding new resources. Seventy-five percent considered hiring more employees a low priority, and almost two-thirds (63 percent) said the same about increasing their investment in technology. Seventy-nine percent prioritized a cut in operating costs in the coming year, an increase of 25 percent from when the question was last surveyed (in 2006).

For the last 22 quarters, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. An Index score of zero reflects that an equal number of small business owners are optimistic and pessimistic about their companies’ situation. Results are based on telephone interviews with 605 small business owners nationwide conducted November 5- 17, 2008. The margin of sampling error is +/- 4 percentage points.

Source: Wells Fargo & Co.