Small businesses seem to be optimistic about their opportunities for growth, even while they view the economy as lackluster.
 
That’s one of the most striking results of a Voice of the Customer survey of its borrowers Live Oak Bank commissioned this past fall.
 
“Customers are positive about their financial position, with the majority anticipating an improved financial condition over the next 12 months,” the bank’s summary stated. “Certain verticals are more optimistic than others & some are more susceptible to recession-related hardships. However, 60% (on average) believe now is a good time for them to expand their business. Nearly a quarter of customers will look to borrow over the next 12 months, primarily to support growing their business.”
 
Survey respondents also cited the challenges of finding staff and keeping up with the rising costs of materials and supplies. But small business owners’ optimism about their business prospects in the face of a possible recession and a softening economy “was one of our biggest takeaways” and “positively surprising,” Live Oak Bank President Huntley Garriott said Thursday.
 
“The fact of supply chain disruptions, rising costs and labor shortages – we’ve been hearing that anecdotally since the beginning of the pandemic,” Garriott continued.
 
He said it wasn’t surprising to bank officials to see that about 25% of their customers plan to transition the ownership of their company within the next five years, a part of what’s been called the “silver tsunami” of retiring baby boomers.
 
“Maybe it’s surprising how many of them have started working with a broker,” Garriott added.
 
The 2022 Voice of the Customer survey, conducted by Barlow Research Associates, Inc., was the first in what the bank plans as an annual check-in with its borrowers.
 
“This was meant to really get the pulse, the tone of our customers,” Garriott said. “The information is primarily something valuable to give back to them: ‘Here’s what others in your space think.’ It’s benchmarking their perspectives against those of others in their industry.”
 
Of the 16 business segments surveyed, small business confidence and stability varied from the most-challenged industries (pharmacies, chicken growing, funeral homes/cemeteries and wine/craft beverages) to the strongest (government contracting, automotive care, energy/infrastructure and service contractors/restorers). Yet half of the customers responding said their financial condition had improved over the past 12 months and 93% were optimistic about their financial outlook for the upcoming year, with 36% anticipating the status quo and 57% expecting their situation to improve.
 
At the same time, only 11% expect the U.S. economy to improve over the same period. The majority – 70% – anticipate a deterioration in the economy.
 
“The impact of a recession will be different across verticals, with some anticipating much more negative impacts than others,” the report stated. Those industries expecting the most negative impacts from a near-term recession are funeral homes/cemeteries, franchise operations, wine/craft beverages, professional services and chicken growing.
 
Nevertheless, most Live Oak Bank customers surveyed believe it is a good time to expand their business, with service contractors, energy/infrastructure providers and government contractors feeling the most strongly. Nearly 25% of survey respondents expect to borrow over the next 12 months to grow their business or to consolidate or refinance current debt.
 
“We’re really pleased with our customers’ involvement [in the survey] and pleased with Barlow Research,” Garriott said. “We have two primary goals for the information: one, to give it back to our customers; and two, that it will drive more engagement and customers will be more willing to share their information as they see the value of the survey.”
 
Results will also “influence where we are heading in the business,” Garriott added. “The more sectors that have plans to grow, we plan to spend more time in those sectors. It will influence how we see some of these sectors in the market as well.”
 
Barlow Research invited 4,588 Live Oak borrowers to participate in the 2022 Voice of the Customer survey, which was conducted between Sept. 21 and Nov. 11, 2022. Of those invited, 768 customers responded, a response rate of 16.7%.
 
The full survey findings can be found here.