Small business sentiment dropped in the first half of the year, with small business owners citing concerns about the economy, regulation and the presidential election, according to a new survey.

Capital One’s latest Spark Business Barometer, an ongoing national study of small businesses tracking financial conditions, economic perceptions, hiring plans and other indicators of small business growth, revealed a nine point drop in the percentage of business owners who see conditions as “good” or “excellent” compared to one year ago. In addition, fewer businesses are planning to hire, with 26 percent reporting plans to add to their workforce in the next six months, compared to 32 percent the same time last year.

“Now is a critical time for small businesses as the country anticipates a change in leadership and new opportunities and challenges, such as market dynamics and new regulations and tax laws, which can have a significant impact on business results,” said Keri Gohman, head of small business banking at Capital One, in a statement.

Despite the continued decline in sentiment, some small business owners remain optimistic. According to the study, many business owners are anticipating stronger financial results in the future, with 39 percent expecting to be in a better financial position in the next six months.

Forty-one percent of business owners say current business conditions are “excellent or good,” compared to 50 percent in 2015, and 44 percent the year before (in 2014). More businesses report “poor” conditions this year compared to last (with 19 percent of business owners reporting “poor” conditions compared to 15 percent in Q1 2015). Fewer business owners believe business conditions are good (34 percent, compared to 41 percent last year, and 44 percent four years ago during Q2 2012).

Thirty-nine percent of business owners believe their financial position will be better in the next six months (compared to 38 percent in Q2 2015 and 37 percent in Q3 2012). 

Election Concerns
Business owners are most concerned about the potential impact of the election on their business. When it comes to running their business, one in four (25 percent) business owners say their primary concern is the impact of the upcoming presidential election – above competition, hiring and retaining talent and the regulatory environment. When evaluating presidential candidates, they are most focused on tax policies on small business (29 percent), the importance on economic growth (18 percent), growing health care costs (17 percent), and changing regulations at the local and national level (15 percent).

Hiring Plans
Fewer business owners are planning to hire in the near-term, with more businesses considering part-time employees or contractors, and with less small businesses investing in employee benefits like 401(k) plans. Twenty-six percent of business owners said they plan to hire employees in the next six months, compared to 32 percent one year ago, and 37 percent in the second quarter of 2012. Of those who plan to hire, 50 percent of small business owners plan to hire full time employees this year, compared to 54 percent this time last year.

Twenty-five percent of women plan to hire employees in the next six months, with 73 percent of those hires being part-time employees. Twenty-seven percent of male business owners plan to hire in the next six months, with 51 percent of them consisting of part-time employees. The percentage of small businesses offering 401(k) plans declined nearly 50 percent since the fourth quarter of 2014—from 24 percent to 13 percent—this year, despite the variety of simple, low-cost plans available in the marketplace.

Women and younger business owners continue to be the most optimistic. Nearly half (49 percent) of total respondents believe business conditions will remain stable over the next six months. Forty-four percent of women business owners anticipate that their business will be in better financial standing in the next six months, compared to 36 percent for men. In addition, nearly three-fourths (72 percent) of

Millennials say their business will be in better financial shape in six months—compared to only 34 percent of SBOs over 50—probably due to 38 percent of Millennials reporting increased sales in the last six months.

Digital and Social Media
Business owners are still not fully capitalizing on digital, analytic and social tools, according to the survey. Despite the rapid growth of new digital, mobile and social tools designed to help business owners manage, market and grow their enterprises, some business owners are still not adopting these technologies. Only twenty-six percent of the small business owners who use social media say they are “very familiar” with the ability to leverage commerce opportunities and market products through social media.

Less than one quarter (21 percent) of business owners currently use data analytics to make more informed business decisions. Larger businesses have adopted cloud technologies at double the rate compared to smaller businesses (50 percent with more than 50 employees have adopted vs. 19 percent with less than five employees). Forty percent said they do not currently use social media at all for their business.

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