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Comparing Expectations: Big Business vs. Small Business


We’ve been chronicling the disconnect between small businesses still mired in the recession and big public companies beginning to recover. Hoping to explain this a bit more, I took a look at two surveys about business expectations: The Business Roundtable’s CEO Survey, representing big business, and the National Federation of Independent Business Economic Trends survey of the group’s small business members.

The two ask similar questions about companies’ plans to expand employment, increase capital spending, and sales expectations. One important caveat before we look at the data: In general, the NFIB asks business owners about their plans/expectations in the next three months, while the Business Roundtable asks about the next six months. The charts below represent the net percentage of survey respondents who indicated an increase or decrease. (For example, if 35% of CEOs expect to increase employment and 20% expect to decrease employment, it appears on the chart it as a net 15% expect to increase.) Charts after the jump.

Employment

Big companies expected to cut jobs much more dramatically from the end of 2008 through the middle of 2009:

[full size chart]

Small companies have fewer workers to cut and probably tend to avoid layoffs as long as possible because of the time and cost involved in hiring and training new workers later on. Neither survey yet shows a net positive percentage of companies expecting to increase employment in the near future.

Capital Spending

There's a similar pattern for capital investment, the spending on equipment and other long-term assets that broadly indicates businesses are preparing for increased demand:

[full size chart]

Big companies overwhelmingly expected to decrease capital spending, but the NFIB's survey shows a relatively steady net percentage of businesses expecting to increase capital outlays. The number is down for sure (16% in the most recent survey, compared to 30% at the end of 2007), but it's still positive.

Sales

The questions about sales expectations show big company CEOs on the whole much more bullish about growth before the financial crisis. That makes sense -- public companies are built for growth, while many small businesses are more interested in sustaining their current business than growing.

[full size chart]

Big business expectations took a steep drive but are now recovering to near pre-crisis levels. By contrast, the majority of small business owners surveyed haven't expected sales growth since the beginning of 2008, and they still don't.

Taken together, the charts show that big companies expected to cut more severely through the downturn. Having cut more severely, they're now expecting a bigger rebound -- in hiring, capital spending, and sales. On the other hand, small companies never cut back as much. (Many also went out of business -- their responses would drop off the surveys, biasing results toward survivors.)

I'm curious how these charts square with business owners' experience. Does your company expect to expand employment, or increase capital spending? Has your firm responded to the downturn differently than larger counterparts in your industry? Let us know what you think.


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