2016 Small Business Growth: Why Some Businesses Plan to Hire
By: Catherine Conlan
Eboxlab, a company that provides IT support, is looking to hire. “Due to the influx of people moving to Denver and the increased business that’s followed, we have a need for more staff,” says Aryana Jaleh, Eboxlab’s office manager.
And Eboxlab isn’t alone. Lower energy prices and a strong dollar have improved conditions for small businesses over the past 18 months, says Chris Rush, division vice president of strategy for ADP Small Business Services. And according to the fall 2015 Bank of America Small Business Owner Report, 79 percent of small business owners plan to expand their business in the next five years.
Small business hiring has seen modest increases in the form of full-time, part-time or independent contractors, says Andrew Flamm, director of the Small Business Development Center (SBDC) at Pace University’s Lubin School of Business. Companies are adding employees as they expand product or service offerings to meet niches in the marketplace, he says.
As the backbone of the economy, small businesses have seen several factors improve enough to drive new hires. Here’s why some small businesses plan to hire in 2016.
Easier Access to Cash
Lending improved for small businesses in the last three quarters of 2015, Rush says; the majority of those who applied for credit received it. Zero-percent interest rates designed to boost the economy gave small businesses the cash injection they needed to take on additional revenue-generating opportunities, creating a need for new hires.
“Community development financial institutions (CDFIs), credit unions and other local lenders continue to meet a crucial need for access to financing for small businesses, in particular for start-ups, those with modest lending needs and entrepreneurs with limited or poor credit,” Flamm says. With an improved economic climate, there’s also been a slight uptick in lending activity by larger mainstream financial institutions, he says.
According to the Q1 2015 Quarterly Lending Bulletin from the Small Business Administration, small businesses have seen lending options expand and small lenders are approving more loans than larger institutions. In addition, while the first quarter is usually a low point for venture capital, an SBA bulletin reported that 2015 saw the most VC investment dollars in the first period since 2000. The SBA says peer-to-peer lending and crowdfunding are likely to continue to emerge as viable funding sources, as well.
Increased Consumer Spending
The strengthening economy made it possible for more people to buy more goods and services, Rush says. Increased demand from customers contributes to the need for small businesses to hire. Consumer confidence continued to rise through the end of 2015 into 2016, as consumers reported optimism about the state of the economy and their own job prospects. The 2015 December five percent unemployment rate remained unchanged.
“Overall, 2015 was a good year for small businesses as they witnessed strong positive sales growth,” says Taylor Johnson, small business experts at Legal Templates. “As the unemployment rate continues to drop, we can expect small business hiring to become more competitive.”
Growing Demand from Larger Businesses
Small businesses have seen demand increase from consumers, but business-to-business organizations have also seen demand rise. Small businesses that provide specialized help with administrative tasks such as regulation navigation, for example, will see increased demand, Rush says.
In addition, health and wellness companies that help employers minimize the financial costs associated with employee health, such as increased sick leave, absenteeism and decreased productivity, may also see growth. “Health services such as fitness studios and health coaches will reap the benefits of this trend in 2016,” Rush says.
Other B2B growth areas, according to Rush include technology. Small businesses will continue to look for ways to take advantage of IT solutions to serve more clients. Translation services will also be a growth area as businesses become increasingly global and diverse.