Business Services

Business confidence seems to be improving

According to a recent survey by Administaff Inc., the business confidence among small business owners in the country’s economic prospects is improving, with majority of them expecting a full recovery by 2010.

The survey shows that about 58% of the respondents expect the economy to recover by 2010, while 14% expect the recovery to start from this year itself. Nearly 83% of the respondents are most concerned about the economy’s health in the current year and 45% mentioned that managing operating costs remains their biggest concern.

However, the confidence-boosting response was that about 41% of the respondents foresee an increase in sales during the remaining part of 2009, as opposed to only 15% who expect a decline in sales during the same period. Additionally, 60% of the respondents stated that they have been able to either satisfy or exceed their performance plans for 2009.

Yet another piece of data, recently released by Visa, shows an encouraging trend in small business spending in the U.S.. The spending on Visa business cards, designed for small businesses, returned to pre-September 2008 levels by the end of Q2 2009. In fact, the number of transactions made through Visa Business Cards increased 19% year-on-year in June. The amount spent on the transactions also increased by 11% year-on-year. As per the data released, two spending categories have seen large increases in the recent months – temporary staff recruitment and travel agency spend.

Temporary Staff Recruitment

Total payments made via Visa Business Cards increased 23% in Q2 2009 after tumbling 22% in Q4 2008 and a further 17% in Q1 2009. Also, the number of transactions for temporary staff recruitment increased 72% in Q2 2009 over Q1 2009.

Travel Agency Spend

Although the travel industry has reportedly been hit by the recession, the number of business transactions increased 10% year-on-year in June 2009. After a 26% drop between Q3 and Q4 2008, the payments increased 5% in Q1 2009 and 13% in Q2 2009. The data, however, shows that even though payments made to travel agents are increasing, small businesses continue to have a strict control on their travel and accommodation budgets. The number of Visa Business Card transactions made on air travel has returned to pre-October levels but the value of those transactions has stayed much lower – on average 3% lower in Q1 and Q2 2009.

Nigel Eaton, Vice President, Visa Commercial said, “It’s too early to talk about a recovery in the small business economy but the last quarter has seen a marked reversal of the downward trend in spending. Whilst businesses are still aiming to cut costs wherever possible, uncertainty about the rest of 2009 is having a strategic impact on some areas of spending – for example a surge in recruiting for the short rather than long-term.”

In such a fluid state of the economy, companies in the professional & business services sector need to bring efficiency in their operations and effectively market their services to become profitable. Large companies exploit the benefits of economies of scale and have the ability to grab a bigger chunk of large, national accounts. For the small companies to remain profitable, they will have to offer specialized services or superior customer services. Overall, the fate of this sector is dependent on the business spending levels, which in turn depends on the health of the economy as a whole.