Businesses hopeful but holding

California’s small-business owners are more optimistic than last year but plan to keep capital expenditures and staffing levels about the same, according to a survey released last week.

The survey, by Union Bank, found that 53% of business owners who responded expect an economic recovery during the second half of 2010 and 2011, and 51% are optimistic about seeing higher profits in 2010.

The latter represents a 17% increase from last year’s study, which showed a nine-year low in respondents’ profitability outlook, according to a news release from Union Bank. Still, 21% of business owners said they expect to increase capital spending in 2010.

“We’ve been through the deepest recession since the 1930s, so it’s not surprising that small-business owners are in a holding pattern,” Joseph Benoit, head of Union Bank’s business banking group, said in the release. “Most entrepreneurs believe the worst is over, but … they’re not confident enough to shift into a growth mode yet.”

The survey included 2,541 small-business owners throughout California, who were interviewed in January.

The survey found that 24% of small businesses laid off employees for financial reasons in 2009, the highest since the survey began tracking staff reductions in 2002.

Nearly half of business owners — 48% — reported lower sales in 2009 than in 2008. Fifty-five percent cut their operating costs last year, and 39% reduced their debt to protect their companies.

The top challenge to businesses that responded to the survey remained the state’s economy, which was the No. 1 concern for 60% of business owners.

Another major concern is workers’ compensation costs, as 65% of businesses reported that their workers’ compensation insurance premiums remained the same in 2009, and 26% reported a rise in their premiums.

Other findings include:

 19% of business owners were denied a loan or access to business credit in 2009, and 67% of these businesses were unable to find alternate financing.

 37% reported no change in their pricing for products or services in 2009, while another 30% raised some prices and lowered others.

 41% said they had less flexibility in negotiating costs and services with vendors in 2009 than in 2008.

 45% of small-business owners offer health-care coverage, down slightly from last year.

 The top advantages of doing business in California identified in the survey are the state’s climate, opportunities for growth and family ties.

 52% offer paid vacation, a drop of 6% from last year and 10% from 2008. Thirty-eight percent offer flexible work arrangements.

 43% are using recycled materials, but 30% have taken no action to make their business “greener.”

— OCLNN.com