Despite the stock market's problems, small business owners -- particularly the proprietors of local companies -- generally are optimistic about the outlook for their enterprises in the coming year, according to a new survey.
Small businesses, which account for 55 percent of all existing jobs and are responsible for the creation of most new jobs, continued to see increases in sales and profits in the past year and are optimistic about improvements for next year desspite the stock market's plunge on Oct. 19, according to the survey, which was released yesterday by Arthur Andersen & Co., the accounting and consulting firm. The survey covered 8,000 small business executives, including 300 in the Washington area.
The survey found that 85 percent of the small business owners in the Washington area were upbeat about the 1988 outlook for their companies, compared with almost 80 percent nationally.
"These entrepreneurs are so used to swimming upstream, they're undaunted" by the grim economic outlook of many Wall Street watchers, said Steven J. Appel, managing director of Arthur Andersen's small business division.
Washington has more than its fair share of companies that fit the small business description -- owner-managed companies with sales between $1 million and $120 million.
"Despite the popular misconception that the federal government is the major employer here, more than 72 percent of the Washington area work force is privately employed," said John Cherin, managing partner of Arthur Andersen's Tysons Corner office. Much of that employment is provided by small businesses, he said.
Local entrepreneurs show some distinct differences from their national counterparts. More than 44 percent of area small businesses provide services, compared with 23 percent nationwide. Manufacturing makes up only 16 percent of the local businesses, compared with 27 percent nationally.
In addition, small businesses in this area truly are small. About 58 percent of local respondents to the survey had yearly sales of less than $5 million, while only 44 percent nationally had sales that low. In addition, Washington area CEOs are younger and more of their businesses have been in existence for less than a decade than those surveyed nationally.
While most expect that consumers will continue to spend on services and goods, small business owners are not Pollyannas when it comes to the problems they're facing.
Nearly 75 percent of the survey respondents said they were concerned about the continuing rise of liability insurance costs. In the past year, 35 percent of those surveyed have seen their rates increase by more than 25 percent.
More than 40 percent of small business owners are concerned that it will be more difficult for them to obtain loans because of turmoil in the capital markets.
Nearly 40 percent of small business owners said they had been adversely affected by questionable business practices, including bribes, kickbacks, price collusion and conflicts of interest.
Locally, the most negative factor in doing business is labor costs, according to the survey. Government attitudes toward business were considered both good and bad: About 33 percent of the local companies surveyed said government attitudes toward business were a positive aspect of doing business here, while 21 percent considered government attitudes among the most negative factors