The nation’s unemployment rate may have hit a 26-year high in September but many small businessowners are getting ready to hire.  The latest Intuit Payroll survey found that nearly half of the small business owners surveyed, 44 percent, are planning to hire new employees within the next 12 months. At the same time, many small business owners believe that benefits are key to attracting new hires but are finding them difficult to afford.

“Economists may have declared the recession over, but on Main Street, unemployment figures are what really matter,” said Nora Denzel, senior vice president of Intuit’s Employee Management Solutions Division, which helps more than 1 million small businesses easily and affordably manage their payroll. “There are struggles ahead, nobody is uncorking the champagne bottle quite yet, but we are starting to see small signs of optimism.”

These 12-month hiring plans coincide with a somewhat optimistic view of their own prospects for growth. Sixty percent expect their business to grow in the next year. Newer businesses are the most bullish: 80 percent of companies founded less than three years ago expect to grow over the next year, compared to roughly half that have been in operation for 10 years or more.

When it comes to hiring, small business owners are looking for candidates with a broader skill set. Fifty percent of the small business respondents said they were looking for a “people person” or “jack of all trades,” over a “creative genius” (11 percent) or “mathematical wizard” (4 percent).

Benefits Key to Attracting Talent

While small business owners get ready to hire, many of them are in a quandary when it comes to attracting talent. Nearly 90 percent of survey participants said that health insurance benefits are important to attracting and retaining good employees. Yet 58 percent don’t offer healthcare insurance, with nearly 50 percent stating that they can’t afford it.

Employer-provided retirement plans are even scarcer. Among the businesses surveyed just one-fourth offer retirement benefits. Of those who don’t, nearly two-thirds said they don’t have a responsibility to do so while the remainder said that they can’t find an affordable plan.

“There’s a widening gap of expectations,” said Denzel. “On one hand, we as a society assume that health and retirement benefits are part of every employee’s compensation package. And yet even as these small businesses gear up to hire, according to our results, small businesses are leery about what those benefits will cost.”

Additional Findings

The survey also found that:

• Friends and family matter. Seventy-nine percent of small business owners surveyed have hired a friend or family member and only 22 percent said that this was a bad decision. The reason may have to do with trust, which was cited as one of the two biggest hiring challenges, along with finding employees with the right experience.
• Long-term relationships are important. Forty-four percent of the small business owner respondents reported that their first employee still works for them.
• Stimulus funds not a factor. Consistent with the previous Intuit Payroll Survey conducted three months ago, only 1 percent of respondents reported receiving federal stimulus money. Yet 74 percent admit that they are probably not taking advantage of all the benefits available to their business under the federal economic stimulus plan.

In some areas of technology adoption, “Concerned MBs” are likely to show fewer adoption plans in this time period as they are adopting a “wait & see” attitude regarding future market conditions. However, it is interesting to note that in usage of some technologies (such as hosted CRM and SaaS adoption) these “Concerned MBs” show higher adoption levels than other SMBs.

“In the era of global recession SMBs feel that they need to maintain better customer relationship management to increase customer loyalty,” Mr. Banga says. “SaaS adoption also comes to the forefront since many SMBs are gradually awakening to the intrinsic advantages of SaaS – viz. lower upfront cost and TCO, less maintenance hassles, the ability to reduce IT staff, etc.” 20% of India SMBs indicate using hosted software applications to supplement internal IT resources will be a key strategic focus area for them in the next 12 months.

The impact of the current economic downturn on local/regional economies is of greater concern to small businesses than to their MB counterparts. Conversely these same SBs are not being as greatly affected by changes in the national and global economy as the mid-market firms. “A major reason for this is that most SBs (84%) have only a single location, earn almost three fourths of their revenues from local areas, and operations are mainly confined to local territories,” says Mr. Banga.

In addition to the economy, there are several major business challenges facing India SMBs today. More than two thirds of firms state that local competition is their greatest hurdle to overcome, followed closely by increasing customer satisfaction and loyalty, and improving employee productivity. India SMBs are looking for IT solutions to help address the current shortfalls. These findings are also corroborated in AMI’s latest quarterly tracking study, Impacts of a Game-Changing Economic Downturn: How to Market Effectively & Stay Competitive – India Small and Medium Businesses. According to this, 40% of IN SMBs are seeking to leverage technology to reduce costs/make processes more efficient and improve employee productivity. As a specific example, over half of IN SMBs are planning to improve processes or invest in training to increase employee productivity. Another key technology for India SMBs is CRM software – over one-third of SMBs are considering CRM usage to help them manage customer relationships and retain customers as a key strategic IT issue in the next 12 months.