Small businesses looking to make gains

New companies still struggling

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While the economic recovery is gaining steam among the area's more established entrepreneurs, smaller companies are still hoping to see true progress, according to two new studies.

A recent survey by the Entrepreneurs' Organization, an Alexandria, Va.-based invitation-only global small business network, showed that optimism among entrepreneurs in Pittsburgh and around the world is improving.

The Global Entrepreneur Indicator, released last week, found 44 percent of Pittsburgh respondents reporting their companies experienced higher revenues over the past six months and 73 percent expecting even greater revenues in the next six months.

Those results were in line with the global picture, where 61 percent of worldwide respondents reported higher revenues the past six months and 76 percent anticipating higher revenues during the next six months.

Mark Proud, president of the Pittsburgh chapter of the Entrepreneurs Organization and CEO of Bridgeville-based automated solutions provider The Proud Co., said increased activity in manufacturing, energy and technology sectors are partially responsible for the local turnaround.

He said increasing regional support for entrepreneurs is also a factor.

"I think there is a tremendous energy surrounding entrepreneurship in Pittsburgh," he said. "I've seen firsthand from members that many have not only been surviving the past few years but have grown significantly."

Although the outlook may be rosy for Global Entrepreneurs Indicator respondents, all of whom owned businesses with at least $1 million in annual revenues and averaged revenues of $18.3 million per year, the year has been more challenging for smaller operations.

The Nashville, Tenn.-based National Federation of Independent Business reported that confidence among small business owners saw a 2.3 percent drop in October. The federation's Small Business Optimism Index tallied data from 1,940 respondents, with only 5 percent reporting plans to increase employment and 23 percent reporting plans to make capital outlays.

Respondents also showed serious doubts about the economy, with only 2 percent expecting higher future sales and 6 percent saying now is a good time to expand.

"The current reading is hardly something to cheer about," reads a portion of the report's summary, which notes that the average value of the index since the recovery started has been several points below the 35-year average through 2007 and below readings typically experienced in a recovery.

Holly Wade, a senior policy analyst with the NFIB Research Foundation, said the organization's optimism index results reflect the realities of a completely different market than that tracked by the Entrepreneurs Association.

Ninety percent of respondents to the Small Business Optimism Index featured 40 employees or less, while Global Entrepreneurs Indicator survey respondents had an average of 192 employees.

A November survey of 762 National Federation of Independent Business members showed that hiring was up among owners by an average of .05 workers per firm, with seasonal adjustments.

However, larger firms that gained income through exports and other resources over the past six months are much more likely to hire than the smaller firms still trying to catch up after October's federal government shutdown, said Ms. Wade.

"The majority still think it's a bad time to expand, and blame the economy and political climate. The optimism index has yet to return to 'normal' and historically few owners are adding employees or are planning to in the future."

Deborah M. Todd: dtodd@post-gazette.com or 412-263-1652.


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