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PRIVATE CAPITALMARKETS PROJECT
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P E P P E R D I N E
2016 Economic Forecast: Insights from Small and Mid-Sized Business Owners
Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project
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© 2012-‐2016 Pepperdine University. All rights reserved. Pepperdine Private Capital Access Index (“PCA Index”) is a trademark of Pepperdine University. PCA Index content is the intellectual property of Pepperdine University or its third party content providers. Any copying, republicaIon or redistribuIon of PCA Index content, including but not limited to caching, framing or similar means, is expressly prohibited without the prior wriKen consent of Pepperdine University. Pepperdine University shall not be liable for any errors, omissions or delays in PCA Index content, or for any acIons taken in reliance thereon.
PUBLISHED BY
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ACKNOWLEDGEMENTS
I’d also like to thank the following people at The Graziadio School of Business and Management for their contributions:
David M. Smith, Ph.D. Dean
John K. Paglia, Ph.D.
Associate Dean, Associate Professor of Finance
Lisa Perry Director of Marketing & Communications
Irina Shaykhutdinova Research Associate
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• 25 questions • Invite to participate distributed to sample from Dun & Bradstreet business database
• 2,469 completed responses • Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)
• Responses collected from Feb 2 – Feb 19, 2016
ABOUT THE 2016 ECONOMIC FORECAST SURVEY
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This research was made possible with the support of Dun & Bradstreet.
DUN & BRADSTREET
Jeffrey Stibel Vice Chairman
Judy Hackett
Chief Marketing Officer
Aaron Stibel Chief Technology Officer
Heather Herndon
Director, Marketing and Communications
Lauren Simpson Marketing and Communications Manager
Bernice Brennan
Director, Creative Services
Ben Pollock Marketing Manager
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2016 ECONOMIC FORECAST
Projec+ons in January 2016 Projec+ons in January 2015
Whole sample <$5 million $5-‐$100
million Whole sample <$5 million $5-‐$100 million
This year US GDP 0.4% 0.4% 0.5% 1.1% 1.1% 1.6%
Next year US GDP 1.3% 1.3% 1.1% 1.6% 1.6% 2.0%
Probability of US recession in the next year 32.5% 32.8% 29.9% 25.5% 25.8% 22.1%
S&P 500 0.9% 1.1% 0.0% 4.4% 4.4% 5.1%
US Unemployment Rate (12/31) 6.3% 6.4% 5.6% 6.1% 6.1% 6.1%
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CONFIDENCE IN GDP GROWTH PROJECTIONS
7
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
Very unsure Somewhat unsure
Neither confident not unsure
Somewhat confident
Very confident
12% 11%
34% 34%
8% 12% 11%
33% 34%
9% 13% 10%
40% 32%
5%
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CONFIDENCE IN BUSINESS GROWTH PROSPECTS
8
0% 20% 40% 60% 80%
100%
More confident Somewhat more confident
Neither more nor less confident
Somewhat less confident
Less confident
2012 22% 32% 26% 12% 8% 2013 21% 24% 25% 15% 15% 2014 27% 29% 24% 10% 11% 2015 35% 31% 22% 7% 6% 2016 50% 36% 10% 4%
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Impediments
Most Influen+al Least Influen+al
Respondents in 2016 Respondents in 2015
Respondents in 2016 Respondents in 2015 Whole
sample <$5
million $5-‐$100 million
Whole sample
<$5 million
$5-‐$100 million
Limited access to capital 26% 28% 12% 24% 41% 38% 59% 40%
Government regula+ons (tax, healthcare) 35% 34% 41% 38% 15% 16% 10% 15%
Global poli+cal and/or economic environment 23% 22% 26% 27% 9% 9% 7% 9%
Domes+c (U.S.) economic and/or poli+cal environment 23% 23% 24% 18% 28% 29% 18% 29%
THE MOST AND THE LEAST INFLUENTIAL IMPEDIMENTS TO U.S. GDP GROWTH NEXT YEAR
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CHANGES IN ECONOMIC FORECAST OVER THE YEARS
January 2016
January 2015
January 2014
January 2013
January 2012
January 2011
This year US GDP (Q4/Q4) 0.4% 1% 0.6% 0.4% 0.7% 2.0%
Next year US GDP (Q4/Q4) 1.3% 2% 1.2% 0.9% 1.9% 2.5%
US Unemployment Rate (12/31/2012) 6.3% 26% 7.7% 8.0% 8.7% 9.1%
US Housing prices (Q4/Q4) 0.9% n/a 2.8% 3.0% -‐0.8% -‐1.8%
S&P 500 (Q4/Q4) 32.5% 4% 4.0% 3.4% 2.5% 6.5%
Probability of US Recession in 2012 0.4% 6% 29.2% 36.2% 32.0% 28.4%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS BY SIZE
11
0% 5% 10% 15% 20% 25% 30% 35%
0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 31-‐40 41-‐50 51-‐75 76 -‐ 100
101 -‐ 200
Whole sample 32% 34% 19% 7% 3% 1% 1% 1% 0% 0% 0% 0% < $5 million 34% 35% 18% 7% 3% 1% 1% 0% 0% 0% 0% 0% $5 million -‐$100 million 18% 23% 25% 14% 6% 5% 1% 2% 2% 1% 1% 1%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE UNDER $5 MILLION
12
0%
20%
40%
60%
80%
100%
0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 2012, <$5 million 47% 34% 10% 3% 1% 0% 0%
2013, <$5 million 48% 34% 11% 4% 1% 0% 0%
2014, <$5 million 43% 35% 14% 5% 1% 1% 0%
2015, <$5 million 45% 33% 13% 5% 1% 1% 1%
2016, <$5 million 34% 35% 18% 7% 3% 1% 1%
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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE BETWEEN $5 MILLION AND $100 MILLION
13
0%
20%
40%
60%
80%
100%
0 1-‐2 3-‐5 6-‐10 11-‐15 16-‐20 21-‐30 31-‐40 41-‐50 More than 50
2012, $5M -‐ $100M 27% 21% 21% 10% 5% 3% 3% 1% 1% 2%
2013, $5M -‐ $100M 32% 22% 18% 12% 6% 2% 4% 1% 1% 1%
2014, $5M -‐ $100M 23% 26% 22% 13% 6% 2% 3% 2% 1% 2%
2015, $5M -‐ $100M 27% 22% 24% 11% 3% 4% 3% 3% 1% 2%
2016, $5M -‐ $100M 18% 23% 25% 14% 6% 5% 1% 2% 2% 4%
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PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE
14
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
52% 48%
74%
53% 51%
78%
56% 51%
69%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS
15
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
58% 55%
79%
60% 58%
77% 65% 62%
80%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX
16
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
12% 13% 8% 18% 18% 15%
22% 23% 17%
2014 2015 2016
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PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE
17
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
57% 58% 49% 43% 43% 41%
49% 49% 46%
2014 2015 2016
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PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR
18
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
42% 41% 52% 47% 46%
58% 47% 46%
59%
2014 2015 2016
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PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR
19
0%
20%
40%
60%
80%
100%
Whole sample <$5 million $5-‐$100 million
60% 60% 63% 68% 68% 69% 71% 72% 69%
2014 2015 2016
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POLICIES TO HELP SPUR U.S. JOB CREATION
20
0% 20% 40% 60% 80%
100%
Regulatory reform Tax incen+ves Increased access to capital
Educa+on reform Increased compe++ve posi+on with foreign
trade partners
Repeal or Modify Affordable Care Act
2011 17% 19% 44% 14%
2012 28% 21% 30% 5% 15%
2013 28% 28% 26% 6% 13%
2014 13% 19% 22% 6% 8% 32%
2015 13% 23% 23% 8% 9% 23%
2016 12% 23% 26% 7% 12% 20%
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POLICIES SUPPORTED IN 2016
21
75%
82% 66%
32%
48%
55%
34%
28%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Raising the debt ceiling when limit is reached in early March
Balanced US Budget
Comprehensive immigra+on reform with a path to ci+zenship
Democrats retaining control of the Senate in November
Repeal of the Affordable Care Act
Significant Reform of the Affordable Care Act
Con+nua+on of "Quan+ta+ve Easing" by Federal Reserve
Congress con+nuing to extend long-‐term unemployment benefits
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CANDIDATES FOR U.S. PRESIDENT WHICH OFFER THE BEST POLICIES FOR SMALL BUSINESS ACORDING TO RESPONDENTS
22
0%
20%
40%
60%
80%
100%
Donald Trump
Hilary Clinton Bernie Sanders
Ted Cruz John Kasich Marco Rubio Jeb Bush Ben Carson Other
Whole sample 34% 18% 12% 8% 7% 5% 4% 3% 9%
<$5 million 34% 18% 13% 7% 6% 6% 4% 3% 9%
$5-‐$100 million 32% 13% 6% 12% 18% 6% 4% 2% 8%
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DETAILS ABOUT THE RESPONDENTS GEOGRAPHIC LOCATION
23
Less than or equal to 1011 - 2526 - 5051 - 7576 - 100101 - 150151 - 200more than 200
CA#
OR#
WA#
MT# ND# MN#
ID#WY#
SD#
NV#UT#
AZ#
CO#
NM#
TX#
NE#
KS#
OK# AR#
LA#MS# AL#
FL#
GA#
TN#SC#
NC#
VA#WV#KY#MO#
IL#IA#
WI#MI#
IN#OH#
MD#
PA#NJ#
NY#
ME#
NH#VT#MA#RI#
CT#
HI#AK#
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DETAILS ABOUT THE RESPONDENTS INDUSTRY
24
28%
14% 10% 8%
7% 7%
6% 5%
4% 3% 3% 2% 1% 2% Services
Construc+on Retail trade Finance & real estate Manufacturing Informa+on technology or services Transporta+on and warehousing Health care Wholesale trade Educa+onal services Arts, entertainment or recrea+on Forestry, fishing, hun+ng or agriculture U+li+es & mining Unclassified establishments
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DETAILS ABOUT THE RESPONDENTS ANNUAL REVENUES
25
7% 5% 3% 4% 7%
10%
15% 11% 10%
9% 8%
4% 3% 1% 1% 3% $0 or pre-‐revenue stage
$1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐ $25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $10,000,000 $10,000,001 -‐ $25,000,000 $25,000,001 -‐ $50,000,000 $50,000,001 -‐ $100,000,000 $100,000,001 -‐ $500,000,000
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE
26
5% 2% 1%
3% 3% 2%
3% 2% 3%
23%
11%
6%
10%
5% 5% 4% 3% 3%
6% 3.6%
0%
5%
10%
15%
20%
25%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M
27
5%
2% 2% 3% 3%
2% 3%
2% 3%
23%
11%
5%
9%
5% 5% 4% 3% 3%
7%
3.1%
0%
5%
10%
15%
20%
25%
Decline Increase
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M
28
2% 5%
2% 3% 4% 2%
18%
11%
6%
14%
6% 8% 7%
5%
1%
5%
7.8%
0% 2% 4% 6% 8%
10% 12% 14% 16% 18% 20%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE
29
2% 1% 1% 1% 2% 2% 1% 1%
15% 13%
11% 12%
7% 7% 7%
4% 3%
10% 11.5%
0% 2% 4% 6% 8%
10% 12% 14% 16%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M
30
2% 1% 1% 1% 2% 2% 1% 1%
14% 13%
10%
12%
6% 7%
7%
4% 4%
12% 12.0%
0% 2% 4% 6% 8%
10% 12% 14% 16%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M
31
1% 1% 2%
4% 1%
16%
12%
15%
11% 12%
7% 9%
4%
1%
4%
8.6%
0% 2% 4% 6% 8%
10% 12% 14% 16% 18%
Decline Increase
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DETAILS ABOUT THE RESPONDENTS ANNUAL INCOME
32
10% 9% 6%
9%
14% 17%
15%
7% 5% 3%
2% 1% 1% 1% Nega+ve (net loss) $1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐$25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $50,000,000 $50,000,001 -‐ $100,000,000 Greater than $100,000,000
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DETAILS ABOUT THE RESPONDENTS TOTAL BUSINESS ASSETS
33
3% 10% 8%
9%
10% 12% 11%
8%
8% 6%
5% 3% 2% 5% $0
$1 -‐ $5,000 $5,001 -‐ $10,000 $10,001 -‐ $25,000 $25,001 -‐ $50,000 $50,001 -‐ $100,000 $100,001 -‐ $250,000 $250,001 -‐ $500,000 $500,001 -‐ $1,000,000 $1,000,001 -‐ $2,000,000 $2,000,001 -‐ $5,000,000 $5,000,001 -‐ $10,000,000 $10,000,001 -‐ $25,000,000 Greater than $25,000,000
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DETAILS ABOUT THE RESPONDENTS FIRM AGE
34
9% 8% 7%
10%
18% 20%
28%
Less than 1 year
At least 1 but less than 2
At least 2 but less than 3
At least 3 but less than 5
At least 5 but less than 10
At least 10 but less than 20
20 or more
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DETAILS ABOUT THE RESPONDENTS NUMBER OF FULL-TIME EMPLOYEES
35
8%
46%
19%
10% 4%
13% 0 1-‐2
3-‐5 6-‐10
11-‐15 More than 15
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DETAILS ABOUT THE RESPONDENTS NUMBER OF PART-TIME EMPLOYEES
36
43%
33%
13% 5% 2%
4% 0 1-‐2
3-‐5 6-‐10
11-‐15 More than 15
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DETAILS ABOUT THE RESPONDENTS PRIMARY BUSINESS ACTIVITY
37
32%
68%
Sales Service
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DETAILS ABOUT THE RESPONDENTS PERCENTAGE OF CERTIFIED WOMEN-OWNED BUSINESSES
38
0%
20%
40%
60%
80%
100%
Whole sample < $5 million $5 million -‐$100 million
19% 20% 10%
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About Pepperdine Private Capital Markets Project The Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management is the first simultaneous, comprehensive, and on-going investigation of the major private capital market segments. The research seeks to understand the true cost of private capital across market types and the investment expectations of privately-held business owners; providing lenders, investors and the businesses that depend on them with critical data to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized. Download reports and find more information at http://bschool.pepperdine.edu/privatecapital. About Pepperdine University’s Graziadio School of Business and Management A leader in cul+va+ng entrepreneurship and digital innova+on, the Pepperdine University Graziadio School of Business and Management focuses on the real-‐world applica+on of MBA-‐level business concepts. The Graziadio School provides student-‐focused, globally-‐oriented educa+on through part-‐+me, full-‐+me, and execu+ve MBA programs at our five Southern California loca+ons and Silicon Valley, Santa Barbara, and Dallas campuses as well as through online and hybrid formats. In addi+on, the Graziadio School offers a variety of master of science programs, a bachelor of science in management degree-‐comple+on program, and the Presidents and Key Execu+ves MBA as well as execu+ve educa+on cer+ficate programs. Follow the Graziadio School on Facebook (www.facebook.com/pepperdine.graziadio), Twiker at @GraziadioSchool (hkps://twiker.com/graziadioschool) and LinkedIn (hkps://www.linkedin.com/edu).
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40
Thank YouCraig Everett, Ph.D., MBA
Director, Pepperdine Private Capital Markets Project http://bschool.pepperdine.edu/privatecapital
[email protected] 310.506.8543
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