Focus on Growth and Hiring Plans Remain as Optimism in the Economy Drops for Small Business Owners, According to the OPEN from American Express® Small Business Monitor

Business Wire, April 21, 2008

Economic Issues Most Influential in Upcoming Presidential Election

NEW YORK -- More than one third of small business owners report plans to hire full or part/time staff over the next six months, but optimism is at the lowest point in the six-year history of the OPEN from American Express[R] Small Business Monitor, a semi-annual survey of business owners.

Despite an uncertain economy, seven in 10 business owners plan to grow their business over the next six months. Half of all entrepreneurs are willing to take a financial risk to do so.

Business owners find themselves challenged in a number of ways in the current uncertain economic environment. Cash flow concerns including growing accounts receivable and the rising costs of doing business, especially rising energy costs, are impacting the bottom line.

The economy is cited by four in 10 small business owners (44%) as the issue that will most sway their decision on the next President of the United States, followed at a distance by homeland security (cited by 16%).

"Like most Americans, SBOs are concerned about the uncertain economy, "said Susan Sobbott, president OPEN from American Express. "However, true to their resilient, entrepreneurial spirit, they tell us that they remain focused on opportunities for the future and growing their business."

The most optimistic group of entrepreneurs, perhaps due to having endured downturns, is the over 60 age group. For these business owners the biggest challenge to growth is not an uncertain economy but the rising costs of doing business (27%). Nine in 10 of entrepreneurs over 60 (92%) describe themselves as seeing "the glass as half-full" (vs. 86% overall).

Optimism Drops: Varies by Region and Industry

Optimism among entrepreneurs about business prospects over the next six months has fallen. This spring, four in 10 business owners report a positive outlook (45%). That is down from 67% in spring 2007, 68% in spring 2006, 85% in spring 2005, 72% in spring 2004, 56% in spring 2003 and 64% in fall 2002. The number of entrepreneurs that see the economy improving over the next six months and expanding opportunities for their business has dropped sharply to 9% --the lowest level in the survey's history. This is down from 21% in spring 2007, 23% in spring 2006, 36% in spring 2005, 34% in spring 2004, 21% in spring 2003 and 19% in fall 2002.

Business owners in the retail industry have the most negative outlook on the economy, as nearly half expect the economic climate to negatively affect their business prospects (46% vs. 37% of business owners overall). One in five businesses in the North Central states* (20%) report that their company risks going out of business because of the economy.

Half of business owners (52%) do not believe the economic stimulus package signed by President Bush will help small businesses compared to 30% who believe it will help.

Growth is Still on the Agenda; Highest for Those with Hiring Plans

In the face of economic concerns business owners have not abandoned plans for growth. Seven in 10 business owners (71%) plan to grow their business over the next six months, on par with 75% in spring 2007. Half of business owners (51%) are willing to take a financial risk in order to grow their business, down slightly from fall 2007 (57%).

Hiring plans are in the cards for one-third of entrepreneurs this spring (38%), on par with 36% last spring and up from 31% last fall. Among those business owners with hiring plans over the next six months, eight in 10 (80%) plan to grow their business.

Nearly seven in 10 entrepreneurs with hiring plans (68%) say they need to hire to handle their growing business. This number is greater among entrepreneurs in the South (77%). It is also greater among male business owners as more than seven out of 10 plan to hire for this reason (73% vs. 48% of female owners).

More than half of entrepreneurs (57%) will hire to help increase business volume. Four in 10 (41%) will hire because they need seasonal help, one-in-three say they will hire because they have finally found the right candidate for the position (31%), or because they have a new business venture (26%).

On a more cautionary note, four in 10 business owners plan to cut back on staff (41%), a sharp increase from spring 2007 when only 29% planned to cut back.

As entrepreneurs look to grow their business they have not lost sight of their commitment to customers and 86% say they differentiate their business by offering exceptional customer service.

Although capital investment plans are down year over year, half of all business owners still plan to make investments as a way to grow their business over the next six months (53% vs. 60% last spring). The greatest number of entrepreneurs will invest in the area of technology (36%). In addition to technology, other investment areas include office equipment (17%), manufacturing/production equipment and office furnishings (each 13%) and real estate (8%).

Mounting Concerns about Cash Flow and the Size of Accounts Receivable