Why LA small business owners are feeling better about the economy
Small business owners in the Los Angeles area are feeling better about the local and national economies than they were six months ago but they still have concerns over rising healthcare costs, high interest rates, the strength of the U.S. dollar and credit availability.
Those observations are included in the fall 2016 Bank of America Small Business Owner Report. The semi-annual study found that 47 percent of Los Angeles-area entrepreneurs feel their local economy will improve over the next 12 months. That’s up 7 percentage points from the spring and it’s 10 percentage points higher than the national average of 37 percent.
Confidence in the national economy is also up, jumping to 39 percent this fall compared with 29 percent in the spring. That’s 8 percentage points higher than the national average.
Troy Bosch, Los Angeles small business banker manager at Bank of America, said small business owners are finally “shaking off some of the uncertainty” from earlier this year.
“In addition to their economic optimism, it’s encouraging to see that hiring plans are on the rise and revenue expectations are holding steady,” Bosch said in a statement.
Not everyone is feeling that optimistic.
“I think things are worse than they were six months ago,” said Ed Maguire, owner of Woodlowe Music Center in Woodland Hills. “The number of students enrolled in our music classes is down. Right now we have about 40 students enrolled, but six months ago we had 70.”
Maguire attributes part of that to a normal rate of attrition. But he also rolled in another factor.
“Some of the kids’ parents are having money problems,” he said. “That’s pretty common. We had to cut back on our buying of instruments and accessories. I’m hoping things pick up. They have in the past.”
Another factor that’s not reflected in the BofA report is Donald Trump’s recent win in the presidential election. Will a Trump presidency be good — or bad — for Southern California and the national economy?
That depends on who you ask.
“He may not have a direct influence on local business but he does have a background in business, so I think that should swing more to the positive side,” said Joe De Lorenzo, who co-owns the Salvatore Italian Restaurant in Montebello along with his brother Anthony. “I think it could make for a more positive outlook.”
John Anthony Lewis, who owns John Anthony Lewis Architect Inc. in Westlake Village, isn’t so sure about that.
“His whole plan for bringing about change is to run this country like a business, but the reports I’ve heard say he’s had a lot of bankruptcies,” Lewis said. “I think we’re going to be looking at more of the same where the wealthy and privileged at the top get all of the breaks.”
The BofA report also notes that 84 percent of Los Angeles small business owners lean heavily on their families for emotional, operational and/or financial support.
Most (54 percent) say family and/or friends have loaned or gifted them money to help ensure the success of their operations. And nearly half say they rely on family or friends to serve at least one important role in their business, whether as an advisor, employee, investor or partner.
In regarding to hiring, 39 percent are planning to boost their payrolls over the next 12 months, up from 33 percent in the spring and 25 percent nationwide. Looking further out, 67 percent of small business owners in the L.A. area say they will grow their businesses over the next five years. That’s up slightly from 64 percent in the spring and significantly higher than 55 percent nationwide.
Rising health care costs topped the list of concerns in BofA’s small business report, with 72 percent saying they are worried that it will impact their business over the next year.
Their concerns are well founded. Health care-related expenses account for nearly 20 percent of the nation’s GDP and the rise is costs is showing no signs of slowing. This trend has left employers of all sizes trying to figure out how to offer meaningful health care benefits to attract good employees while keeping insurance costs at reasonable levels.