Bussiness
Small business distress has suddenly turned to optimism, hiring, following Trump win
Deadline approaches for small businesses to report ownership
The small business mandate comes from the Corporate Transparency Act, which passed in 2021 to combat money laundering and financing for terrorism.
Since the COVID-19 pandemic, Sergio’s Family Restaurants, a 50-year-old South Florida institution, has struggled to scratch out a profit at its six Cuban eateries.
Americans socked by high inflation have cut their discretionary spending, and restaurants, in particular, have taken it on the chin.
“There’s been a lot of pessimism,” said Sergio’s President Carlos Gazitua.
The chain, he said, barely broke even the first half of 2024 and lost money in the July-September quarter as sales fell compared to a year earlier.
Then, in early November, Donald Trump won the presidential race.
Since then, revenue has jumped 10% to 15% each week compared to a year earlier, capped by a 25% spike the week before Christmas, Gazitua said. Election-related uncertainty, which crimped spending, has given way to optimism that Trump will lower taxes, giving people more spending money, Gazitua believes.
Gazitua likewise has been buoyed by the prospect of lower taxes and fewer regulations for his business. Recently, he decided to open two restaurants next year, his first new outlets in a decade, projects that will cost $2 million and add 100 employees.
“The election gave us the opportunity to move forward,” he said. “I don’t think we would have done it” otherwise.
Since Trump’s victory, small business’ confidence has soared along with their intentions to ramp up hiring and investment, surveys show. If the blueprints come to fruition, it could bolster a U.S. economy that faces headwinds from Trump’s plans to impose sweeping tariffs on imports and deport millions of immigrants lacking permanent legal status.
Businesses with fewer than 500 employees comprise nearly half of U.S. employment and most job creation, according to the National Federation of Independent Business and the Small Business Administration.
Is business confidence high now?
In November, small business optimism leaped 8.5% to the highest level since June 2021 (from 93.7 to 101.7) and topped the 50-year average after languishing below that benchmark for nearly three years, according to NFIB’s monthly survey. The share of businesses planning to hire, make capital purchases and expand also vaulted to three-year highs.
“The election was a huge sigh of relief,” said Holly Wade, head of NFIB’s research center. “The fear of massive tax increases and the continuation of a regulatory environment have been really troubling. They were desperate for a change in focus and they got it.”
Although economists expect Trump’s plans for new tariffs and an immigration crackdown to boost labor costs and reignite inflation, Wade said the details of those policies are unclear and so business owners haven’t been rattled by them.
Are small businesses struggling in 2024?
Just a few months ago, many small firms were teetering, squeezed by labor costs that had surged due to pandemic-related worker shortages and consumer spending that was flattening after a post-COVID-19 burst. Meanwhile interest rates, including those for small business loans, spiked following the Federal Reserve’s flurry of rate hikes to fight inflation.
In October, the gap between small companies reporting lower versus higher sales the past three months was the largest since the depths of the pandemic in 2020. In November, that gap shrank by about two-thirds to the smallest since June. The seasonally adjusted data should filter out November’s annual rise in holiday sales.
Could an election spark such a dramatic turnabout for the nation’s entrepreneurs?
Ryan Sweet, chief U.S. economist of Oxford Economics, is skeptical. Small businesses generally prefer Republican administrations that are more likely to cut taxes and regulations, Sweet wrote in a note to clients. As a result, his research shows “that a Democratic president reduces confidence while a Republican boosts” it.
But that, he added, doesn’t necessarily translate into actual spending and hiring. “The partisan bias reinforces our view that it’s more important to watch what consumers and business do, rather than what they say,” Sweet wrote.
Taylor Bowley, an economist at Bank of America Institute, which studies consumer and small business behavior, places more stock in business perceptions.
“It’s not everything but it is something,” she said, noting their plans to hire and expand also haves ticked up based on the institute’s own survey.
“They’re expecting to put their money where their mouth is,” said Nicholas Tremper, an economist at Gusto, a payroll provider for small businesses.
Are interest rates expected to go back down?
Other forces are also coalescing to create a more hospitable environment for firm owners. Since September, the Fed has been cutting interest rates as inflation has eased. That has reduced the cost of loans and made banks more willing to lend to small enterprises, Bowley said, citing the institute’s data.
Meanwhile, wages and salaries grew 3.8% annually in the third quarter, down from 4.1% the prior quarter and 4.5% a year ago, according to the Bureau of Labor Statistics. That means slower-growing labor costs for small firms.
Rent hikes, another headache for small businesses, also have moderated to 6% annually in November from 11% in July and 20% in early 2023, Bank of America figures show.
How is consumer spending doing?
At the same time, consumer spending has remained sturdy, growing at a robust 3.7% annual rate in the third quarter, after adjusting for inflation, and a solid 0.3% in November, according to government reports.
Sergio’s owner, Gazitua, said he has struggled the past couple of years because grocery store price increases have moderated even as restaurant tabs keep climbing due to high labor costs. That has coaxed more Americans to eat at home or order less profitable take-out meals, he said.
Several months ago, he was approached by a landlord offering a big rent discount for a space occupied by a restaurant that was delinquent on its lease payments. Gazitua said he weighed the offer but didn’t feel confident enough to approve the new eatery until Trump’s victory.
He said he also planned to turn a vacant rooftop area above one of his restaurants into a space for private events. But after the election, he decided instead to spend $250,000 to open a rooftop restaurant under a new brand.
Trump and a Republican Congress are expected to extend tax cuts passed during his first term that trimmed tax rates for small businesses, provided a 20% deduction and allowed immediate write-offs for investments, such as Gazitua’s new outlets.
Gazitua thinks the amount of the write-off could be stepped up next year, allowing him to use the tax savings to help finance the new restaurants.
“You have to be prepared for the opportunity,” he said.
Other business owners believe they’ll benefit from lighter regulation.
Tristan Hamberg, owner of Refined Painting Services in Gresham, Oregon, believes Trump’s vow to open more federal land to oil drilling will lower oil prices and his costs for oil-based paints, though analysts are skeptical the “drill, baby drill” strategy will reduce prices. Hamberg also thinks the Trump administration will ease constraints on the amount of gas paints can emit.
And he’s optimistic that tax cuts will spur sales among the higher-income households that drive his revenue growth.
“It’s more disposable income,” he said.
Figuring revenue will grow 20% next year, Hamberg plans to add two full-time employees to his staff of five and convert five part-timers to full-time status – a plan he said was solidified by the election results.
Alfredo Ortiz, CEO of the Job Creators Network, a right-leaning small business group, believes all it takes is increased confidence to nudge entrepreneurs into action.
“Once you change that mindset, (you)can spend again and invest again,” he said.
Other small firms are nervous about Trump’s policies.
Tariffs pose ‘a major concern’
Phoenix-based White Tie Productions, which provides audio-visual equipment and displays for corporate events, saw sales surge 15% this year as firms felt more comfortable staging in-person events following COVID-19, said company President Ross Snyder.
With Snyder projecting up to a 25% rise in business next year, he plans to add two or three employees to his staff of 15 in coming months.
But there’s a wrinkle.
White Tie buys much of its cameras, lighting fixtures and other equipment from Canada, Mexico and China – countries that Trump has threatened with tariffs of 10% to 25% as soon as his first day in office.
Snyder said he likely would pass along much of any cost increase to his customers, likely causing them to downsize the scale of events and reducing his revenue. He also would absorb part of the higher prices, narrowing his profits.
Reduced revenue or profits could force him to hold off on the new hires, Snyder said, adding that tariffs would be “a major concern.”
“We live in a worldwide economy,” he said.
18 Business Shaping the Future of Customer Experience
Which balaclavas to wear this winter ?
Movies and TV shows casting across the US
United Cup: Great Britain’s Billy Harris loses to Poland’s Hubert Hurkacz before Katie Boulter plays Iga Swiatek
Why we love Rosalía’s style ?
Vermont H.S. sports scores for Thursday, Jan. 2: See how your favorite team fared
Horoscope Tomorrow, January 03, 2025, read predictions for all sun signs
Northwestern visits Penn State following Baldwin’s 23-point game
NATO is working to reroute data through space, fearing Russia could slice undersea internet cables
