Small busi­nesses in­vest de­spite D.C. grid­lock

Healthy econ­omy, strong sales over­ride lin­ger­ing un­cer­tainty

USA TODAY US Edition - - MONEY - Paul David­son

Small-busi­ness own­ers are tired of sit­ting on their hands while Wash­ing­ton dithers.

De­spite lin­ger­ing un­cer­tainty over tax and health care pol­icy, U.S. en­trepreneurs are mov­ing ahead with in­vest­ment and ex­pan­sion plans that could juice eco­nomic growth.

Thirty-two per­cent of small busi­nesses are plan­ning cap­i­tal out­lays in the next three to six months, the strongest read­ing since 2006, ac­cord­ing to the Na­tional Fed­er­a­tion of In­de­pen­dent Busi­ness’ Au­gust sur­vey. And

27% say the next three months is a “good time to ex­pand,” the largest share in 13 years.

A Septem­ber sur­vey of economists by the Na­tional As­so­ci­a­tion for Busi­ness Eco­nomics, out Mon­day, pre­dicts that busi­ness in­vest­ment over­all — by small and larger com­pa­nies — will grow

4.4% this year, up from their 3% me­dian es­ti­mate in De­cem­ber. Busi­nesses that ex­pand, buy new equip­ment or build new struc- tures typ­i­cally hire work­ers to op­er­ate the ma­chines or oc­cupy build­ings, and the fac­to­ries that make the prod­ucts gen­er­ally need to staff up as well.

Many small firms need to re­place worn-out com­put­ers, fac­tory ma­chines and power tools and no longer can wait for Pres­i­dent Trump and Congress to agree on busi­ness tax re­form that may pro­vide them ex­tra cash and more gen­er­ous write-offs, says econ­o­mist Diane Swonk, who heads DS Eco­nomics. “You’re fi­nally get­ting to that point in the busi­ness cy­cle,” she says.

But Wil­liam Dunkel­berg, NFIB’s chief econ­o­mist, says the firms’ plans are mostly driven by stronger sales and a health­ier econ­omy. “Cash flows are bet­ter,” he says. “They need more ca­pac­ity, more abil­ity to pro­duce.”

Stone­field Engi­neer­ing & De­sign of Rutherford, N.J., which han­dles apart­ment and other com­mer­cial real es­tate projects, has recorded 15% to 20% in­creases in rev­enue both in 2016 and this year, CEO Chuck Olivo says. So a year ago, the com­pany bought a sec­ond of­fice build­ing in down­town Rutherford to ac­com­mo­date the ad­di­tion of about five em­ploy­ees, spend­ing more than $500,000 on ren­o­va­tions, he says. Olivo plans a sim­i­lar project in the area within months.

“I think there’s a pos­i­tive mo- men­tum with the econ­omy based on the clients we have that are work­ing on projects,” Olivo says.

It’s still un­cer­tain whether busi­nesses’ tax rates will be cut to the 15% Trump has pro­posed from as high as 40% or if a com­pro­mise will be reached. It’s also un­clear if firms will be able to write off an en­tire cap­i­tal pur­chase in a year vs. the cur­rent five-year sched­ule and if the cur­rent health care re­form law will be mod­i­fied. The leg­is­la­tion re­quires busi­nesses with at least 50 em­ploy­ees to pro­vide health cover­age to those who work at least

30 hours a week.

Small busi­nesses “don’t have a very good idea what’s go­ing to hap­pen,” Dunkel­berg says. “What they do know for cer­tain is that it’s go­ing to be bet­ter than what they’ve had.”

And that’s enough to spur many into act­ing. Some com­pa­nies are splurg­ing on la­bor-sav­ing equip­ment be­cause they can’t find work­ers. With un­em­ploy­ment at a low 4.4%, nearly nine of

10 small busi­nesses that were hir­ing last month said there were few or no qual­i­fied ap­pli­cants, ac­cord­ing to the NFIB sur­vey.

The tight job mar­ket “will en­cour­age com­pa­nies to look into pro­duc­tiv­ity-en­hanc­ing tech­nol­ogy,” says Tom Por­celli, chief U.S. econ­o­mist of RBC Cap­i­tal Mar­kets.

My Metal Busi­ness of Fuller­ton, Calif., has strug­gled to find rep­re­sen­ta­tives to stay in touch with cus­tomers dur­ing the or­der­ing process. “I’ve had a prob­lem get­ting qual­ity ré­sumés,” Pres­i­dent Craig Mar­tyn says.

So he’s mak­ing a six-fig­ure pur­chase of soft­ware that au­to­mates the task and will sup­ple­ment ex­ist­ing cus­tomer ser­vice rep­re­sen­ta­tives. Be­sides sav­ing on la­bor costs, the tech en­sures that cus­tomers will be con­tacted on time. Work­ers some­times may miss a sched­uled call or email.

The com­pany is also spend­ing $120,000 on three new lasers to make some metal and wood busi­ness cards in the U.S. Un­til re­cently, all pro­duc­tion was out­sourced to China. The U.S. oper­a­tion al­lows for faster de­liv­er­ies on rush or­ders and bet­ter qual­ity con­trol, Mar­tyn says. He hired a worker to run the lasers.

He says he thought about hold­ing off on the pur­chases un­til pol­icy de­bates are re­solved. But he adds that wait­ing means “you’re go­ing to lose time and the op­por­tu­nity for rev­enue … I don’t think there’s ever a per­fect time to in­vest. You just need to do it.”


Craig Mar­tyn, pres­i­dent of My Metal Busi­ness, is buy­ing three new lasers to make prod­ucts in the United States. Pre­vi­ously, all pro­duc­tion was out­sourced to China.

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