By Karen E. Klein

Barry Nash's media-training outfit hit a rough patch in 2003. Thanks to long-term contracts, it wasn't until then that The Coaching Company, based in Dallas, really felt the pinch of the post-September 11 economy. "Looking for renewals and new business was really tough," Nash says, "but things turned around for us in 2004, and I'm feeling cautiously optimistic about next year."

Nash is not alone in his buoyed spirits. Some 67% of CEOs feel that current economic conditions are better than a year ago, according to a recent survey of 10,000 CEOs at small and midsize businesses conducted by TEC International, an organization for chief executives based in San Diego. Just 7% of respondents in the fourth-quarter survey believe conditions are worse than a year ago, and 64% say they plan to hire in 2005.

ROSY PERSPECTIVE. Among firms with less than 100 employees, 84% of CEOs said they expect to see revenues increase over the next 12 months, one point more than the overall group. Similarly, 73% of small-business owners expected a jump in profitability.

The TEC survey is one of several offering a rosy outlook for the coming year. The latest National Federation of Independent Business Small Business Optimism Index soared four points in November, to tie a 30-year record. And a study by The International Profit Associates Small Business Research Board, conducted after the Nov. 2 election, showed that a majority of small-business owners believe the reelection of President George W. Bush's will spark an improved economy in 2005. In that survey, 68% said they were optimistic about the general direction of the country, 28% were pessimistic, and 4% had no opinion.

The TEC survey also showed a positive hiring trend, with 67% of small-business CEOs in particular saying that they plan to add new staff next year. Steven Finder, the founder and CEO of a small chain of laser hair-removal salons called Smooth Solutions, counts himself among them. "We'll bring on people here and there as we grow the business and open some new locations," Finder says of his San Antonio-based outfit, which currently has 80 employees.

NOW HIRING.  Finder lists recruiting and keeping qualified employees as his biggest headache -- a problem shared by many other survey respondents. Asked what the most significant obstacle to hiring has been in the past five months, 26% of small-business owners checked "lack of qualified candidates." The next-biggest factor, at 10%, was "health-care costs," though 39% listed "none of the above."

"Like any retail-services business, 50% of my expenses are for employees," Finder says. "Finding well-trained and motivated people is tough, especially at the technician level. I'm finding that the work ethic isn't as strong today in certain quarters as it used to be."

Using a profit-sharing plan, which applies to every employee in the company, has helped. "For those who work hard, they can make more money based on their performance," he says, "and that gives them an incentive."

HEALTH-CARE WORRIES.  When asked about their most significant business concern, 25% of the small-business owners surveyed by TEC responded "financial issues" -- a list that includes capital, cash flow, and profitability. Nash, whose company specializes in on- and off-air performance coaching for television news personnel, says his top issues remain cash flow and generating enough new business to support growth. "We have the classic problem of the small service business, because either we're serving or we're marketing," he says. "But you have to do both in a very sustained manner in order to continue growing."

Staffing was the second most important business issue cited, at 22%. Mark Franko, who owns a building and contracting company in Richmond, Va., says he hired 10 people in 2004 and wants to add even more next year -- if he can find them. The shortage of skilled laborers and project managers has prevented him from taking full advantage of an increase in local residential renovation projects. "We use every means possible to locate potential employees, from newspaper ads to the Internet to suppliers," Franko says. "The work is here, but the obstacle is finding quality people."

The "primary strategy" for offsetting health-care costs has been passing them on to employees, according to 47% of respondents. With steep oil price increases over the past year, 33% said they have raised their own prices in response, while 32% have simply absorbed the blow in-house.

JOY OF THE SEASON.  When asked which policy goal of the Bush Administration is most likely to have a positive impact on their businesses, 34% of small business CEOs said "reducing taxes," followed by 28% that listed "health-care insurance reform," and 11% that said "strengthen the U.S. dollar." At 73%, most favor Bush's plans to partially privatize Social Security. Despite escalating violence in Iraq, a majority of the small-business group (54%) said U.S. foreign policy had had "no effect" on their businesses in 2004.

And with the year winding down, 86% of employers said they will be doling out bonuses or gifts. According to the survey, 42% planned to give bonuses in line with last year's, while 30% said they would be higher. Just 14% expected to give out less this holiday season.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues