MasterCard Survey Finds Small Businesses Bullish On Q4 2004 and the Coming Year

PURCHASE, NY – MasterCard International today released results of its Small Business Economic and Spend Outlook Survey, which found that a majority of small businesses expect stronger fourth quarter sales in 2004 compared with previous years. The study, conducted from Sept. 20 to Oct. 4, showed that the overwhelming majority of entrepreneurs expect business conditions to improve in 2005. The study also addressed trends in managing business expenses. The MasterCard survey polled financial decision-makers in small businesses with 25 or fewer employees and no more than $10,000,000 in annual revenue. Results point to overarching trends impacting small businesses across the United States and provide insight into differing regional perceptions.

“Across the board, MasterCard research shows that small businesses expect 2005 to be a turning point, as many companies increase revenue, add staff and grow,” said Steve L. Abrams, senior vice president of Corporate Payment Solutions at MasterCard International. “A full 75 percent expect 2005 to be a better year than 2004 — a testament to the resilience and spirit of entrepreneurs in the United States.”

The survey addresses a variety of topics:

• Expectations for Q4 2004 and 2005
• Managing the Business Environment
• Trends in Business Payments

Expectations for Q4 2004 and 2005
Small businesses hold differing views on 2004 sales to date. One-third report that sales exceeded expectations; one-third indicate sales met expectations; and one-third state that sales have fallen short of expectations. However, anticipation for the fourth quarter of 2004 and the coming year are high, with small businesses expecting improvements during both periods.

• The overwhelming majority of small businesses (75 percent) expect 2005 to be better than 2004; 33 percent expect a substantially better year.
• More than half (53 percent) of respondents expect higher sales between October and December 2004 than in the same period in 2003.
• The Southern region is exceedingly positive on the future, with 40 percent of those surveyed expecting a substantially better year in 2005. Businesses in this part of the country also are looking to the fourth quarter to make up revenue shortfalls. Nearly 60 percent of respondents expect fourth-quarter sales to be higher in 2004 than in 2003.

Managing the Business Environment
A majority of small businesses anticipate few changes to result from factors such as healthcare costs and small business tax burdens. More than half (55 percent) believe these issues will not result in changes to their business models next year. Respondents in the Northeast are the most likely to stay the course (62 percent) and not make changes in preparing for 2005.

• Staffing
  • One-third of small businesses surveyed expect to increase staffing in the coming year; about two-thirds (65 percent) anticipate staffing levels will remain relatively constant.

  • Small businesses in both the South and Southwest expect to increase staffing in 2005, with 32 percent reporting plans to hire.
• Capital Spending
  • Seventeen percent of respondents expect to increase capital spending in 2005; 14 percent anticipate decreases in spending.

  • Twenty percent of respondents in the West plan to increase capital spending next year.
• Healthcare Costs
  • The vast majority of respondents (80 percent) report that healthcare costs will not impact staffing levels, although 35 percent of respondents do see rising health costs as having a negative impact on business.
• Tax Liabilities
  • Seventy percent of those surveyed do not anticipate tax changes that would affect their business.

  • Although 36 percent of respondents view current small business tax levels as burdensome, half believe taxes levied on small businesses are appropriate.

Trends in Business Payments
Overall, small businesses in the United States show a growing interest in leveraging business credit and debit cards to manage company expenses. Thirty-nine percent of small businesses expect to increase business credit and debit card usage in 2005. In addition, the survey revealed the following trends in business payments:

• Seventy percent of small businesses surveyed report holding one form of a business credit or debit card, although fewer respondents (20 percent) report having only a business debit card.
• Small businesses in the Northeast were most likely to use small-business credit and debit cards for more than 50 percent of business purchases.
• Small businesses in the West (30 percent) are more likely to have both a business debit card and a business credit card, while Midwestern companies are most likely to have neither (36 percent).

Further details regarding the MasterCard Small Business Economic and Spend Outlook Survey are available by calling 617-663-4909.

Survey Methodology and Respondent Profile
The MasterCard Small Business Economic and Spend Outlook Survey is based on an online survey of 1,145 small business owners and financial decision-makers. All survey respondents are from small businesses with 25 or fewer employees and annual revenue of no more than $10,000,000. The study provides both national results, as well as regional segmentation. The survey was conducted from Sept. 20 to Oct. 4 and administered by Infosurv Inc., an independent market research firm. The survey has a margin of error of plus or minus 2.89 percent.

About MasterCard Working for Small Business
MasterCard Working™ for Small Business is a comprehensive global program that provides small businesses with payment cards, online tools, and other resources that deliver financial control, data management, analysis, and reporting, along with rewards and benefits. More information on MasterCard Working for Small Business is available at www.mastercardworking.com.

About MasterCard International
MasterCard International is a leading global payments solutions company that provides a broad variety of innovative services in support of our global members’ credit, deposit access, electronic cash, business-to-business, and related payment programs. MasterCard International manages a family of well-known, widely accepted payment card brands including MasterCard®, Maestro®, and Cirrus® and serves financial institutions, consumers, and businesses in over 210 countries and territories. The MasterCard award-winning Priceless® advertising campaign is now seen in 97 countries and in 47 languages, giving the MasterCard brand a truly global reach and scope. For more information go to www.mastercardinternational.com.