SMBs expect improved sales, but also higher production costs

3/31/2011

According to a new survey conducted by PNC, nearly half of small business owners are eagerly anticipating improvements in sales over the next six months. However, they also believe rising production costs will limit their companies' overall profitability.

As a result, more than one-third of business owners (37 percent) say they plan on raising prices to maintain their profitability margins. Conversely, only 7 percent intend to lower prices, which may encourage consumers to tighten their purse strings.

"The recovery light hasn't turned green, but it's a lighter shade of yellow," said Stuart Hoffman, chief economist for The PNC Financial Services Group. "The survey results support our view that the half-speed recovery that began in July 2009 is transitioning into a self-sustaining economic expansion for 2011-2012 which will not be derailed by higher energy prices, Europe's sovereign debt problems or the disaster in Japan."

Rising costs aren't small business owners' only problem. According to a recent survey conducted by Office Depot, more than 70 percent also believe small business lending will continue to be an issue in 2011.