ENGLEWOOD, Colo., Feb. 16, 2016 (GLOBE NEWSWIRE) -- On average just under half (45.7%) of U.S. small businesses expect international trade conditions to improve in 2016, according to research conducted by Western Union Business Solutions, a division of the Western Union Company (NYSE:WU).
The findings are a result of independent interviews with nearly 2,200 randomly selected larger, medium, and micro-sized businesses (SMBs) across the nation.
Larger SMEs are most optimistic. The survey found that 68 percent of larger SMBs ($20-100 million in annual revenue) expect international trade conditions to improve, while 43 percent of mid-sized SMBs ($5-20 million in annual revenues) and 38.1 percent of micro SMBs ($1-5 million in annual revenue) expect improvement.
The survey also found that U.S. SMBs are sharply divided in how prepared they are to deal with the effects of a stronger U.S. dollar (USD). Of the larger SMBs surveyed, 42 percent already have existing structures in place to leverage the strength of the USD, with a further 47 percent planning to put them in place. In contrast, only 4.3 percent of mid-sized SMEs ($5-20 million in annual revenues) have a defined plan to address the strength of the USD with another 16 percent ready to install a strategy that prepares to promote their international growth strategy.
Additionally the survey found:
- An average of 56 percent surveyed believe business costs have fallen compared to one year ago.
- Two-thirds (67 percent) of all businesses surveyed believe falling energy costs have greatly or somewhat helped their international trade.
- Over 90 percent of businesses surveyed said the strength of the USD has affected their business.
“Our survey found that while small businesses are reporting a strong tailwind from falling energy costs and lower business costs, almost all are also contending with the effects of a strong dollar,” said Scott Smith, North American Managing Director, Western Union Business Solutions. “These currency conditions are a fundamental aspect of business planning to manage exposures to both large economies, like China and India, or smaller ones, such as Greece. Small businesses’ sensitivity to commodity pricing highlights the delicate nature of this segment’s profitability, which can be offset by payment strategies such as currency hedging.”
2016 Spending
The survey found that technology investment is a top priority for SMBs in the U.S over the next six months. On average, the survey found that 74 percent of the larger SMBs is making a technology investment during this period, while 63 percent of mid-sized SMBs say they will be doing so, and just under half percent of micro SMBs said they would.
Of the U.S. importers and exporters with active plans to grow their business investment, 30.8 percent report that expansion is focused on technology support, with larger SMBs (37%) and micro SMBs (31.6%) most focused on technology investment.
Online sales channels and Internet marketing represent the bulk of the remaining intended investment in the first half of 2016 (24 percent of all SMBs), followed by increased export market development (14.2%), and new product releases (13.7%).
“Effectively used, technology remains the most powerful tool a global small business can deploy,” continued Smith. “These businesses are making powerful technology investments to cut time and expense from their businesses, and shorten the sourcing and delivery of their products and services to global markets.”
Operating in a Volatile World
The survey found that larger SMBs spend an average of 26.4 hours per week on payment issues compared to an average of 8 hours weekly for medium-sized SMBs and 4 hours weekly for micro SMBs. It is Western Union’s general experience that smaller SMBs have fewer employees, so the burden of payment issues is likely much greater in smaller businesses.
Smith added, “Since compressed margins are the biggest current challenge facing U.S. business owners, this emerges as a key focus area for FX providers. Providing dedicated support, education and guidance on the costs of hedging and risk management are vitally important for less sophisticated SMEs and micro businesses who are clearly exposed to a strengthening USD. The smaller the business, the less time, planning and strategic direction they have to plan and manage their currency exposure. They are unlikely to devote time to foreign currency management and invoice tracking.”
In fact, cash flow is a major challenge for many SMBs. Nearly 60 percent of both Larger SMBs and Micro SMBs report squeezed margins as the leading challenge. Mid-sized SMBs say their leading cash-flow-related challenges are falling sales revenue (37.4%) along with squeezed margins (32.9%).
Cash flow is all the more important for SMBs when we look at the financing they report using. Fewer firms are using equity to finance their business (37.2 percent), instead predominantly opting to source working capital solutions (82 percent) or secured debt lines (77 percent).
The survey was conducted in October and November, 2015, by East & Partners and included 2,196 U.S. companies engaged in international trade. Of the companies surveyed, nearly half (43%) of the participants surveyed are business owners or CEOs, while the others are either CFOs, finance directors, or treasurers. Participating companies hailed from a variety of industry sectors, including property and business services (13%), retail (11%), construction (10%), manufacturing (10%), transport and storage (8%), and wholesale (6%). About 42% of survey respondents are from businesses based in New York and other parts of the East Coast, while 27% are California or West Coast-based, and 31% from the Midwest and other regions. The margin of error associated with this level of reporting is +/- 2.0% at a 95% confidence level.
Western Union Business Solutions enables companies of all sizes to send and receive international payments and manage global cash flow, creating unique solutions tailored to suit their individual needs. It is a business unit of the Western Union Company (NYSE:WU), a leading nonbank provider of cross border payments, which offers Business Solutions services in over 30 countries. Clients are supported by a network of trading offices, strategic banking relationships and a global clearing network and can send cross-border foreign exchange payments in more than 135 currencies.
About Western Union
The Western Union Company (NYSE:WU) is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders. As of December 31, 2015, the Western Union, Vigo and Orlandi Valuta branded services were offered through a combined network of over 500,000 agent locations in 200 countries and territories and over 100,000 ATMs and kiosks, and included the capability to send money to over one billion accounts. In 2015, The Western Union Company completed 262 million consumer-to-consumer transactions worldwide, moving $82 billion of principal between consumers, and 508 million business payments. For more information, visit www.westernunion.com.