Similar shares of small businesses reported profitability and employment growth in 2016 as they did in 2015, but fewer reported revenue growth, according to the latest Small Business Credit Survey.
The survey, which was a collaboration of all 12 Federal Reserve banks, provides an in-depth look at small business performance and debt at the end of 2016. This report focuses on employer firms, or those with full- or part-time employees.
Regarding performance, 53 percent of firms reported being profitable in the 2016 survey, with 27 percent reporting a loss and the remainder breaking even. This represents a slight decrease in the gap between profitable and unprofitable firms from 2015, which was 30 percentage points. However, the difference is still significantly higher than the 10-point gap in 2014.1
Employment was a similar story, with 35 percent of firms increasing their employment over the prior 12 months and 18 percent decreasing it. This gap of 17 percentage points was slightly under the 18-point gap in 2015, but notably higher than the 11-point gap in 2014.
However, the gap between firms that increased revenue and those that saw revenue decrease fell. Half of firms reported higher revenue when comparing the last half of 2016 with the same period one year prior, with 29 percent seeing decreased revenue. The 21-point gap was notably lower than the 29-point gap in 2015 and closer to the 19-point gap seen in 2014.
Employer firms appear optimistic about their revenues. The majority (71 percent) expect revenues to be higher in 2017, while 10 percent expect revenues to decline and 19 percent expect no change.
These firms also don’t expect to reduce employment, with only 7 percent anticipating a decrease. The remaining firms were split about evenly between increasing employment (46 percent) and staying the same (47 percent).
The survey noted that 29 percent of employer firms are growing, meaning they increased revenues and employees and have plans to increase or maintain the number of employees.
1 It should be noted that the prior two surveys didn’t have national data, so the data from those years have been reweighted to represent the nation as a whole. This also means that the values and observations in the most recent report will differ slightly from past reports.