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Small Businesses Plan to Increase Investments and Employee Compensation in 2015

COF | March 16, 2015

Capital One's Spark Business Barometer Finds Women and Millennials are Driving Optimism, Particularly at Local Level, but Many Struggle to Achieve Work-Life Balance

MCLEAN, Va., March 16, 2015 /PRNewswire/ -- Small business owners are feeling positive about financial conditions and their local and national economies as they plan to increase investments in business processes, technology, employee compensation and other areas, according to Capital One's latest Spark Business Barometer.

The national survey of small business owners found that half (50 percent) of small businesses' current business conditions are "excellent" or "good" (up 6 points from one year ago), while nearly two thirds (63 percent) are feeling optimistic about their local economies in the coming year. Meanwhile, nearly two-fifths (40 percent) reported increased sales over the past six months, and 35 percent claim their firms' financial position has improved compared to one year ago.

The Barometer also looked at how business owners define and measure success, and revealed the most important factors are customer satisfaction, revenue and profit. Work-life balance and community service are also important, particularly among women, but many female business owners neglect to set boundaries to achieve the balance they desire.

"Small businesses are upbeat, with many anticipating improved economic conditions and planning for growth and investment – a good sign for our economy and the communities these businesses serve," said Keri Gohman, Head of Small Business Banking at Capital One. "However, with that success and plans for increased investment comes greater responsibility and roadblocks to achieving the work-life balance that many business owners, especially women, so highly value. At Capital One, we're committed to understanding these issues and delivering tools and resources that save time and enhance business processes – so business owners can focus on what's most important to them, whether that's in or out of the office."

The Spark Business Barometer uncovered a number of key themes, including:

As the economy improves, so do investments in the business and its employees.

Nearly three-in-five (57 percent) business owners plan to invest more in improving business processes and technology, while nearly the same number (55 percent) are setting aside funds for unexpected emergencies.
Small business owners are focusing on the future, with 35 percent saying they plan to put cash aside for capital investments.
Forty-six percent of respondents are setting funds aside to increase employee compensation, and 55 percent report they are setting aside funds for retirement.

Women and millennial-owned businesses continue to drive optimism.

Nearly three-fourths (73 percent) of millennial and more than half (56 percent) of women led businesses feel current business conditions are good, compared to 46 percent of males.
When asked how their businesses are doing compared to last year, 42 percent of female executives said their businesses are doing "much better" or "somewhat better" compared to 31 percent of males.
More than half of millennials (57 percent) said their businesses are doing better, more than any other generation surveyed.

Customer satisfaction trumps profits and revenues when it comes to measuring success. Work-life balance is also important, but many don't take action to prioritize it.

Customer satisfaction is the most popular measure for success (identified as "very important" by 94 percent of respondents), followed by revenues (77 percent) and profits (76 percent).
Sixty-nine percent of women feel that achieving work-life balance defines success, compared to 58 percent of men. To achieve it, 43 percent of business owners take vacations, one-third (33 percent) set specific times for arriving and departing the office, and more than a quarter (27 percent) restricted the amount of work they bring home.
Women are less likely than men to set ground rules or restrictions on the amount of time they work, the number of days they travel, or the number of speaking engagements they attend. In fact, 31 percent of women say they don't set any ground rules, compared to 25 percent of men.

Business owners believe they're maximizing tax deductions, but may be missing important opportunities.

Roughly eight-in-ten (or 83 percent of) respondents are "confident" they are taking advantage of available tax deductions, and 55 percent claim to be setting aside retirement funds.
Despite this, only seven percent of small business owners say they deduct 401(k) benefit expenses, and only 15 percent actively contribute to a 401(k) plan to improve their personal tax burdens.

E-Commerce is a proven sales driver across the broader business landscape, but small businesses have yet to embrace this sales approach.

Only one-quarter (25 percent) of small business owners surveyed report having websites with e-commerce functionality.
Of those with e-commerce functionality, few realize significant income from it, with a majority (58 percent) earning less than 10 percent of their sales from online purchases.

Capital One is committed to understanding the challenges, trends and perceptions that affect small businesses' overall performance and day-to-day operations. Follow along on Facebook at Capital One Small Business and on Twitter at @CapitalOneSpark. Use hashtag #SparkBizBarometer to follow the conversation.

Survey Methodology
The findings reported in this release are from a telephone survey conducted by the opinion research firm, APCO Insight, the global opinion research division of communications consultancy, APCO Worldwide. APCO Insight interviewed a nationally-representative random sample of 400 for-profit small businesses in the U.S. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from February 3 – February 17, 2015. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer assisted telephone interviewing (CATI) system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes, employee size, and geography.

About Capital One
Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $205.5 billion in deposits and $308.9 billion in total assets as of December 31, 2014. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.