Small Business Problems and Priorities

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Abstract:

The findings of this publication are based on the responses of 4,044 small business owners to a mail survey conducted between late January and early March, 2000. These owners evaluated 75 potential business problems and assessed their severity on a scale of “1” for a “Critical Problem” to “7” for “Not a Problem.” A mean (average) was calculated from the responses for each problem. The problems were then ranked by mean score.

The ten most severe problems for small business in order are: “Cost of Health Insurance,” “Federal Taxes on Business Income,” “Locating Qualified Employees,” “Unreasonable Government Regulations,” “FICA (Social Security) Taxes,” “State Taxes on Business Income,” “Workers’ Compensation Costs,” Federal Paperwork,” “Cash
Flow,” and “Cost of Natural Gas, Gasoline, Fuel Oil.”

The ten least severe problems for small business beginning with the least severe and moving up the list are: “Y2K Impacts,” “Exporting My Products/Services,” Competition from Government or Non-Profit Organizations,” "Competition from Imported Products,” “Selling to Federal/State/Local Governments,” “Obtaining Short-Term (less than 12 months or revolving) Business Loans,” “Credit Rating/Record Errors,” “Locating Satisfactory Suppliers,” and “Long-Term (5 years or more) Business Loans.”

Small business owners disagree most over the evaluation of “Death (Estate) Taxes.” Those with larger firms and greater length of ownership are substantially more concerned about estate taxes than those with smaller firms and shorter tenure. Small business owners also disagree on the severity of several employee-related problems. The
most prominent is “Keeping Skilled Employees” and “Employee Turnover.” Those expressing greatest concern are larger employers and those in the most urban areas. Very small employers and those in the most rural areas are least concerned.

Individual problems were arbitrarily sorted into clusters with a single topic. The cluster containing problems that most often rank toward the top of the problem severity list is “Taxes.” Three of the top six problems are tax-related. The cluster of next greatest concern is “Employees” followed by “Costs.” Problems in the “Technology” cluster draw comparatively little interest.

Since the first of five Small Business Problems and Priorities surveys in 1982, several problems such as “Poor Sales” and “Poor Earnings (Profits)” have varied with the business cycle. However, problems strongly affected by the cycle have also been influenced by a swelling current of underlying strength which has moderated cyclical
swings. There have been secular changes that capture long-term changes in small business owner concerns. The greatest of these changes involves the relentless movement up the list of employee scarcity issues. Gathering business information has become steadily a less serious concern. Few major changes in problem rankings occurred between the prior survey in 1996 and the current edition.

The assessment of problems differ most by industry, employee size, and urban/rural geographic location. Large differences also exist between those who are new in business, i.e., three years old or less, and those who have owned their businesses more than three years. Fewer differences appear by legal form of business, change in average annual sales, primary customer, readiness to adopt new technologies and/or
business practices, and geographic region.