It's shaping up to be a great year for America's entrepreneurs. After seeing revenue growth in 2017, and with federal tax cuts to kick off the new year, 90 percent of small business owners believe that 2018 will be a successful year for their companies.
This new data comes from the Manta Wellness Index, my company's annual survey of more than 2,000 small business owners. But while there is overwhelming optimism for the year ahead, the survey reveals that at least one economic indicator is lagging behind: Hiring.
Running lean is the new normal
Three-quarters of owners reported that 2017 was a successful year for their businesses, and 51 percent saw revenue increases over 2016, according to Manta's survey. But despite the revenue growth, just 36 percent of small business owners said they added workers to their companies' headcount.
In 2018, 51 percent of business owners plan to hire new employees, even though a whopping 90 percent expect a successful year ahead.
Why the disconnect? One reason is that small business owners have learned to do more with less. Coming out of the last recession and painfully slow recovery, entrepreneurs tightened their belts and found a way to get by without adding new employees, even when revenue rebounded.
It used to be that if your business was doing well, you were hiring. As indicators of Main Street's health, optimism and job growth went hand-in-hand. That's just not the case anymore. The definition of a "good year" has changed. Now, growing sales without growing payroll looks pretty good to most business owners.
Here at Manta, I've seen the same shift in the way entrepreneurs approach marketing. Instead of newspaper and yellow pages ads being the first spend area in their budgets, small businesses can get more bang for their marketing bucks with carefully targeted campaigns on social media and search engines. And since digital platforms provide detailed performance metrics, often in real time, you can track and adjust marketing spend along the way, using your budget more efficiently.
Technology has also made it possible to accomplish more work with fewer employees. POS systems with features such as integrated inventory management, invoicing, and payments have streamlined retail operations, while CRM platforms with marketing automation capabilities have made sales teams much more effective.
I advise small business owners to invest in this kind of technology before hiring more employees. They might change their hiring plan or find they can grow sales without having to hire at all.
Looking forward to tax cuts and deregulation
We found another big source of optimism in Manta's survey: The Tax Cuts and Jobs Act. More than 58 percent of respondents said the new law, which went into effect this month, will create better business conditions for their companies.
In addition to lower individual rates on their federal income taxes, many small business owners will be able to take advantage of a 20-percent deduction on pass-through earnings and immediate depreciation on capital expenses, among other measures.
What do business owners plan to do with this windfall? According to the survey, more than 80 percent will invest their tax savings back into their companies, with 44 percent of those owners boosting their marketing efforts, 32 percent investing in technology, and 28 percent investing in new products or services.
This is a big deal for entrepreneurs. Don't miss this chance to invest in your business (unlike the 20 percent who plan to pocket their tax savings). Especially considering that the tax cuts for small business owners are temporary, you should take advantage of the savings while you can. With a smart, targeted digital marketing plan, or an investment in the kind of technology that can make your team more effective, you can turn this short-term gain into long-term revenue growth.
Overall, 61 percent of small business owners said that President Donald Trump's first year in office has positively impacted their optimism. It's no surprise: Business owners have long been among Trump's strongest supporters, responding to the president's promises to lift the burden of undue regulations that saddle small companies.
With tax savings in hand and regulatory relief on the horizon, we should expect big things in the coming year.