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Practical Economics

Small Business Revving Up in 2015

Many firms with fewer than 50 workers have plans to expand, venture into new markets and add to payrolls.

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In a sign of a healthier U.S. economy, small firms in the U.S. will see sales and profits perk up this year on the heels of a strong finish in 2014. For many, sales gains of 8%-9% are on tap, with net profits up roughly 6% from the previous year, which started out with harsh winter weather that hurt business.

See Also: U.S. Economy Pulling Away From Rest of the World

Over 50% of small firms are seeking workers, good news for both job hunters and the economy, as businesses that employ from one to 49 workers account for nearly 30% of all employment in the U.S. However, many employers will find it tough to fill openings because prospective hires lack the needed skills. Nearly 40% will raise salaries this year, the highest proportion of firms to do so in six years. Rising state minimum wages are less of a concern now as more and more smalls see business improving.

Among small firms poised to grow in 2015: Retailers and wholesalers, who account for 17% of all small business jobs and will gain as consumers loosen their purse strings for a variety of goods.

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Home builders. The improving housing market will boost many smalls in the construction industry. The sector provides 10% of small business jobs.

Restaurants and bars. Low gasoline prices spell more discretionary income
for going out on the town, benefiting chefs, bartenders, servers and others. That's 12% of small business jobs.

Health care providers such as doctor’s and dentist’s offices. Around 13% of small business workers are in health care, which is poised to have a strong year.

Also standing to gain: legal, accounting, financial, tax preparation and insurance services, real estate agencies, manufacturers of home goods and metalworking shops.

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Getting credit is a bit easier now, but not as easy as before the recession. Bank-held small business loans are currently 17% below the high reached in 2008. The Small Business Administration will prime the lending pump later this year with an online system that makes it easier for banks to make SBA-backed loans. It’s also starting a program to lure more investment firms to back start-ups. To qualify, such firms must spend at least 50% of investment capital on early-stage businesses.

Donation-based crowdfunding remains popular, of course, helping smalls to find solid footing. Equity crowdfunding -- using online portals to invest in start-ups and other smalls not listed on a stock market -- will also help smalls. It will grow when the Securities and Exchange Commision issues rules in 2016 to protect investors.

On the trade front, the dollar’s soaring value against most currencies will slow exports this year, except to a few strong growth economies, such as India’s.