Citibank Survey Shows Majority of California Small Business Owners Bracing for a Double-Dip Recession

Eighty-five percent are concerned about another downturn, yet three-quarters say they are prepared to weather the storm

Despite continuing challenges, majority of small business owners enjoy running their business

SAN FRANCISCO--(BUSINESS WIRE)-- The vast majority of California’s small business owners (85 percent) are concerned that the economy may experience a double-dip recession, according to the latest Citibank small business survey. At the same time, 74 percent of survey respondents say they are very or somewhat prepared for another downturn, signaling that many California entrepreneurs have adjusted their businesses and finances to get through any additional economic stumbles.

According to the survey, 67 percent of the state’s business owners say they have changed the way they run their business – with 62 percent indicating the way they do business has forever changed. Among the adjustments, respondents cited debt reduction (41 percent), increasing cash reserves (39 percent), hiring freezes (34 percent) and delaying plans for expansion (34 percent). When asked what factors allowed them to weather the recession, California’s small business owners listed long-term client base/relationships (61 percent), effectively managing expenses (53 percent), and strength of marketing (28 percent).

“As one of the largest sources of jobs in California, small businesses will play a key role in any economic recovery,” said Rebecca Macieira-Kaufmann, President of Citibank California. “Our latest survey’s findings are encouraging, showing that many of the state’s small businesses have taken significant action to operate prudently in the current environment and at the same time prepare for growth.”

To improve or grow their business this year, business owners say they plan to work longer hours themselves (61 percent); increase marketing (53 percent); get better pricing from suppliers, vendors, or landlords (46 percent); and increase employee productivity/get by with fewer employees (39 percent).

Realistic but Passionate

Mirroring findings of previous surveys, a majority of California’s small business owners (78 percent) rate current business conditions as only fair or poor, and only 28 percent diagnosed their business as better off today than a year ago. Outlook for the next 12 months appears split, with 51 percent saying they expect their business to improve in that time and 49 percent believing conditions will worsen or remain about the same.

Respondents cited higher taxes (52 percent), a declining demand for their products and services (43 percent), tighter business regulations (38 percent), and the cost of health insurance (33 percent) as the primary challenges to running their business today.

Yet despite the challenging outlook, small business owners’ passion for their work continues to shine through in Citibank’s survey.

Eighty-one percent of California’s small business owners say they like or love running their own business, and 78 percent say they would start their business again even if they knew then what they know now about the challenges they would face. Additionally, 60 percent said they would recommend entrepreneurship as a career to their children.

“In the face of uncertain conditions, California’s business owners remain passionate about their business and unwavering in their career choice,” added Macieira-Kaufmann. “Our survey once again reveals the spirit, passion and commitment of California’s entrepreneurs.”

Small business hiring plans remain tepid, with 78 percent of business owners planning to reduce (8 percent) or keep the same number of employees (70 percent) in the next 12 months. Small business owners say they would increase hiring if they experienced an increase in sales; yet nine in 10 say they would need to see sales increase for at least two quarters in a row before hiring new employees. Other hiring drivers for small business owners include more certainty that the economy is recovering (54 percent) and a reduction in payroll taxes (37 percent).

About the Survey

This Citibank poll was conducted via telephone by Abt SRBI from July 19 to Aug. 18 among a national random sample of 521 small businesses, with revenue over $100,000 and no more than 100 employees. The margin of error is approximately +/- 5 percentage points at the 95% confidence interval. Surveys are subject to other error sources as well, including sampling coverage error, recording error, and respondent error.

About Citibank

Citibank is a member of Citi^®, a leading global financial services company which has approximately 200 million customer accounts and does business in more than 140 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.

Tags/Keywords:
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KEYWORDS:   United States  North America  California

INDUSTRY KEYWORDS:   Small Business  Professional Services  Banking  Finance  Other Professional Services

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