Certain About Uncertainty

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The old adage “There is nothing permanent except change” has never been truer. Business owners know this better than anyone: The world’s economic and political environment has become consistently inconsistent and predictably unpredictable. Most interestingly, recent data suggests that business owners have adapted to this uncertain climate.

At the start of every year, Dun & Bradstreet Credibility Corp. collaborates with Pepperdine University to create our annual Economic Forecast Survey, which projects business trends for the coming year. This year’s survey included 2,713 small- and midsize-business owners from across the country who shared their thoughts on their greatest challenges and opportunities for 2013. We also looked specifically at 200 responses from L.A.-area businesses to generate a gauge for our local economy.

Let’s start with the good news: 49 percent of respondents in Los Angeles were more confident in their business growth prospects in 2013 than they were in 2012. This figure beats the national average by 5 percent. Only 24 percent of respondents said they were less confident in this year’s prospects; only 10 percent gave the lowest possible confidence score (versus 15 percent nationally).

More importantly, L.A. business owners are feeling more confident about their personal prospects – fully half expect to make more money this year than they did in 2012. That’s an optimistic outlook, given that 63 percent reported making less money in 2012 than they did in 2011, a figure slightly higher than the national average of 61 percent.

The fact that business owners are feeling confident in today’s climate is good news given these political and economic times. Uncertainty is bad for business: Business owners require accurate data and predictability in order to make important decisions, ensuring a business can remain profitable. This is especially true for smaller businesses, as they’re often more vulnerable to rapid changes in their market and region. Business owners often pull back when faced with challenges like political instability, market inconsistency and fluctuating consumer confidence. They avoid making important changes in hopes of receiving more consistent information down the road.

Political instability

Unfortunately, this circumstance is unlikely to change any time soon, especially given the current political climates in Washington and Sacramento. Our survey found that 61 percent of business owners think that political instability is negatively impacting their ability to hire. Since policy changes often have major effects on smaller businesses, it makes sense that political instability is detrimental for so many business owners. What’s interesting is that business owners have an increasingly positive outlook despite that political and economic instability.

The last few years have taught us that it is possible for businesses to grow and thrive despite government erraticism. Lately we have seen relative strength in the private sector, in stark contrast to the frailty of many of the world’s governments: Greece and Italy are broke, Japan and many European countries are wobbly, and it seems that not a month goes by without the U.S. government teetering on the edge of a shutdown.

We’re becoming accustomed to uncertainty, which has become the only inevitable certainty. Understandably, business owners are frustrated, but their optimism despite these challenges is indicative that they have come to accept variability and are becoming more immune to economic drama unfolding across the world.

A tougher challenge for business owners is access to capital, which can be influenced by both the banks and government. According to our survey, lack of access to capital and capital programs is the biggest challenge faced by business owners. Fully one-third of L.A. respondents believe that lack of access to capital is what’s hurting small businesses most. A clear majority of L.A. respondents feel that California should be actively involved in increasing access to capital: 70 percent said that the state should work to make capital more accessible to businesses, and the same percentage felt that they didn’t have access to information about available capital programs in California.

Challenges in California are not limited to capital programs: Residents feel an overall sense of dissatisfaction with state government policies. When asked whether their state supports policies that benefit businesses, L.A. respondents gave California some of the lowest scores in the country; 87 percent of L.A.-area small-business owners responded that the policies supported by California are not beneficial to their business, compared with a nationwide average of 50 percent.

Having lived with uncertainty for so long, business owners in the city of Los Angeles, California and the rest of the nation are increasingly unaffected by economic and political volatility. This is good news, but for increased growth, one certainty is a necessity: We must find ways to help business owners access the capital they need to thrive.

To get the complete outlook from the annual survey, check out the full 2013 Economic Forecast Survey by Pepperdine University and Dun & Bradstreet Credibility Corp. here:

Here’s to great business for your company in 2013!

Jeff Stibel is chairman and chief executive of Dun & Bradstreet Credibility Corp. in Malibu.

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