Q2 2014 SMB Job Generation Outlook Report

Q2 2014
SMB Job
Generation
Outlook

1 | SMB Job Generation Outlook Q2 2014
The Lucas Group SMB Job Generation Outlook is an innovative approach to traditional hiring and employment
surveys, gauging both recent and planned activity in the United States small to mid-sized business market.
This, our sixth national survey of SMB executives, examines top-level perspectives on critical issues facing
the American SMB marketplace, including economic developments, employment trends, legislative initiatives,
political environments, and the tangible impact these issues have on business and employment planning.
The SMB Job Generation Outlook has surveyed more than 1,500 SMB executives over the past year and a
half and is conducted in coordination with Polaris Marketing Research and Dr. Goutam Challagalla, Associate
Professor at the Georgia Institute of Technology College of Business. The Outlook is the only economic and
employment survey that captures noteworthy trends – directly from the visions and priorities of the highest
SMB executive offices.
Quantitative results and key findings from the Q2 2014 SMB Job Generation Outlook survey were analyzed,
and through a series of graphs and charts, the statistical relationship of trends in the small to mid-sized business
market has been illustrated. A detailed narrative of the data analysis follows the illustrations on page 12.
Heralded in our national discourse as the jobs engine for economic revitalization, the SMB marketplace plays
a significant role in supporting the backbone of the U.S. economy and providing employment opportunities for
millions of workers.
Lucas Group will continue the SMB Job Generation Outlook survey on a quarterly basis via online surveys
with top executives from a variety of SMBs around the country and across industry segments.
We encourage you to retain this report as a reference. Consider how this information may impact you –
now and throughout the following year. As always, please feel free to contact us. We welcome your questions
and feedback.
Thank you for your interest in this important analysis of the SMB economic and employment outlook.

Nearly 70 percent of SMBs continue to be optimistic about the
economic prospects for their own companies in the coming months,
with 22 percent saying they are very optimistic. While the percentage
of respondents who report the highest levels of optimism remains lower
than responses from one year ago, the 22 percent does mark a small,
though steady, three-quarter increase. SMBs who report pessimism
stayed under 10 percent in Q2 2014, having dropped from an Outlook
history high of 15 percent in Q3 2013 to a survey low of five percent in
Q1 2014.
Consistent with previous surveys, optimism drops among SMB leaders
when considering the U.S. economy as a whole. Whereas 69 percent
report optimism about their own company’s economic prospects, only
50 percent of SMB leaders report being somewhat or very optimistic
about prospects for the overall U.S. economy in the coming quarter. This
is down six points from the survey’s high of 57 percent one year ago.
In relation, pessimism has witnessed a slight rise. Having dropped
steadily since its Q3 2013 high of 34 percent to reach a survey low of 19
percent in Q1 2014, pessimism levels related to the national economy
increased slightly in Q2 to 23 percent.
Indicate your feelings about the following:
TITLES & COMPANY REVENUE
ECONOMIC PROSPECTS FOR COMPANIES & COUNTRY
With a year and half of economic and market data, and more than
1,500 executives surveyed, the Lucas Group SMB Job Generation
Outlook is an insightful and trusted resource for gauging the current
economic opinions and employment plans of America’s small to mid-
sized businesses. This report provides a trending outlook on the issues
and topics most pertinent to today’s SMB market. From Manufacturing
and Finance to Health Care and Information Technology, the Q2
2014 report includes responses from 400 SMB executives whom
knowledgably represent the foundation of the U.S. economy and
workforce.
Fifty-nine percent of the Q2 2014 survey respondents reported 2013
corporate revenues at or below $150M. Another 31 percent reported
revenues between $151M-$600M, and 10 percent of respondents
are in the largest financial segment of the SMB with $601M-$999M
in 2013 revenues. The Q2 2014 report is the sixth edition of the Lucas
Group SMB Job Generation Outlook survey.
> ECONOMIC PROSPECTS FOR YOUR COMPANY
> ECONOMIC PROSPECTS FOR THE UNITED STATES
Very optimistic
Somewhat optimistic
Neither optimistic nor pessimistic
Somewhat pessimistic
Very pessimistic
22%
47%
22%
8%
1%
Very optimistic
Somewhat optimistic
Very pessimistic
6%
44%
27%
19%
4%
2014 company revenues of responding executives:
$25 - $49 $50 - $150 $151 - $300
Million
$301 - $600 $601 - $999
20%
43%
11% 10%
JOB GROWTH PROSPECTS FOR COMPANIES & COUNTRY
Fifty-four percent of Q2 respondents reported being somewhat or
very optimistic about job growth prospects for their own companies.
While down 3 points from Q1, responses were slightly elevated from
the executive outlook one year ago. In terms of job growth prospects,
about one-third of SMBs are in the neutral position, with 33 percent
reporting neither optimism nor pessimism regarding their own
company’s job growth prospects for the coming months. This level of
self neutrality has remained consistent the past several quarters. The
percentage of SMB leaders who express feeling somewhat or very
pessimistic about job growth ticked up slightly from last quarter to 13
percent in Q2.
In terms of national outlook, SMB neutrality levels remained similar.
Thirty-four percent reported neither optimism nor pessimism about
job growth prospects for the U.S. during the next quarter – the
highest level of neutrality in the survey’s six-quarter history. Whereas
the majority of SMBs were optimistic about their own company’s job
growth prospects for Q2 2014 (54 percent), only 42 percent reported
similar optimism about overall U.S. job prospects. Negativity regarding
the nation’s job growth prospects has dropped from its survey high of
37 percent in Q3 2013, but remains at one-fourth of reporting SMBs.
> JOB GROWTH PROSPECTS FOR YOUR COMPANY
> JOB GROWTH PROSPECTS FOR THE UNITED STATES
Very optimistic
Somewhat optimistic
Very pessimistic
13%
41%
33%
10%
3%
Very optimistic
Somewhat optimistic
Very pessimistic
6%
36%
33%
19%
6%
16%

JOB GENERATION
SMBs continue to view themselves and their counterparts as job
generators for the U.S. economy. With 85 percent of small and mid-
sized businesses agreeing with that assertion, one-third of respondents
report strong agreement. Only two percent of respondents disagree
with the statement that SMBs are job generators for the economy.
When asked specifically about their own companies, SMBs report less
agreement with the statement that their own SMB is a job generator.
About two-thirds (67 percent) of respondents agree with the assertion,
and this lowered rate of agreement has been consistent throughout the
survey’s history. Overall agreement is down 10 points in Q2 2014, from
a Q1 2013 high of 75 percent. Also, while 33 percent of respondents
agreed strongly that the SMB market is America’s job generator, only
18 percent report the same intensity of conviction regarding their own
companies. Similarly, neutrality to the statement increases from 13
percent when asked about the entire SMB market to 24 percent for
their specific company. Nine percent of SMB leaders disagree and do
not see their companies as a job generator.
Indicate the extent to which you agree or disagree
with the following statements.
> SMBs ARE THE JOB GENERATORS OF THE U.S. ECONOMY
> I SEE MY COMPANY AS A JOB GENERATOR
Agree strongly
Agree
Neither agree nor disagree
Disagree
Disagree strongly
33%
52%
13%
2%
0%
Agree strongly
Agree
Disagree
Disagree strongly
18%
49%
24%
7%
2%
The majority of small and mid-sized U.S. business leaders say their
companies are in a positive, healthy condition. The percentage of
SMB executives who self-report a position of “maintaining stability”
or “growth” has remained consistently high, near 90 percent each of
the past six quarters. Of the 88 percent of SMB leaders who report
positive positioning in Q2, 40 percent say they are in the most favorable
position of “growth”, down three points from last quarter.
SMBsconsideringthemselvesinapositionof“controlledretrenchment”
or “survival” also remained steady at 12 percent, rates held since Q2
2013. Of those, five percent report their company is in “survival” mode.
Select the statement that best describes your
company’s position.
48%
Maintaining
stability
40%
Growth
7%
Controlled
retrenchment
COMPANY POSITION
5%
Survival

HIRING OR DOWNSIZING IN NEXT QUARTER
The percentage of SMBs planning to hire in the coming months
remained steady from Q1 to Q2, with 45 percent of SMBs reporting
plans to hire. This maintains previously recorded increases, from 38
percent in Q3 2013 to 42 percent in Q4 and 45 percent in Q1 2014.
The smallest percentage of SMBs in Outlook history report plans
to downsize in the coming months, with only nine percent planning
reductions. This survey low falls five points below planned downsizing
one year ago. Slightly fewer than half (46 percent) of SMBs do not plan
any appreciable change in their workforce over the next few months.
Of those planning to hire in the next quarter, SMBs who report big
hiring plans have increased significantly the past several quarters.
When asked about the percentage change hiring plans represent to
a responding SMB’s total workforce, 22 percent report increases of
larger than 26 percent of their workforce. This is up from 6 percent
in Q3 2013, 10 percent in Q4 2013, and 12 percent in Q1 2014. The
largest single jump was seen in the biggest hiring grouping, with 13
percent saying their hiring plans would add more than 50 percent to
their total workforce (more than double the six percent response in Q1).
In relation, those planning to downsize in the coming months are
planning to do so with smaller percentile impact. The majority of
companies (85 percent) reporting reduction plans project their
downsizing will affect less than 25 percent, with 41 percent projecting
reductions of less than 10 percent of their total workforce. Only 15
percent expect reductions of more than 25 percent, the smallest
large-scale reduction impact reported since Q2 2013.
Looking ahead, share your
hiring or downsizing plans
for the next quarter.
45%
Hire additional
employees
9%
Downsize workforce
46%
No change in workforce
or don’t know
Percentage change
these downsizing
plans represent
of your total
workforce.
Percentage change
these downsizing
plans represent
of your total
workforce.
Percentage change
these hiring plans
represent of your
total workforce.
10% or
Less
11% to
25%
26% to
50%
More than 50%
54%
24%
9%
13%
Percentage change
these hiring plans
represent of your
total workforce.
10% or
Less
11% to
25%
26% to
50%
More than 50%
50%
31%
10%
10%
10% or
Less
11% to
25%
26% to
50%
More than
50%
41%
44%
12%
3%
10% or
Less
11% to
25%
26% to
50%
More than
50%
49%
29%
18%
4%
HIRING OR DOWNSIZING IN NEXT 12 MONTHS
Consistent with previous quarters, SMB executives continue to be
more optimistic when considering hiring or downsizing plans for the
next 12 months. This quarter, 57 percent of SMB leaders expect to
hire in the coming year. Up 16 points from the same time last year, this
marks an Outlook high.
Q2 also saw the lowest planned reduction in survey history, with only
11 percent of SMBs reporting plans to downsize in the next 12 months.
While 47 percent of SMBs report no plans to hire or to downsize in the
next quarter, that number thinned to about one-third when considering
the longer 12-month period.
When asked about how these hiring or downsizing plans affect overall
workforce numbers, half say their hiring plans will represent less than
10 percent. The big change from past quarters, however, is in the
number of SMBs who plan to “hire big”. In Q2, 20 percent of SMBs
expect to increase their total workforce by more than 26 percent in
the next year. This survey high is up 12 points from last quarter alone.
Looking ahead,
share your hiring or
downsizing plans for
the next 12 months.
57%
Hire additional
employees
11%
Downsize workforce
32%
No change in workforce
or don’t know

HIRING DIFFICULTY
One of the areas studied by the SMB Job Generation Outlook is
the ease and/or difficulty SMBs face when seeking to hire qualified
professional talent. Over the past year and a half, the survey has
found the available talent gap widening for SMBs. In Q2 2014, only
five percent of SMB leaders report they have no difficulty finding and
hiring qualified candidates for open professional and management
positions. This is the smallest percentage reporting ease in hiring in
the Outlook’s history. In relation, the percentage of executives who
report that finding talent is difficult has risen in Q2 to a survey high of
64 percent, with 14 percent reporting talent acquisition as extremely
difficult. This intense level of difficulty has doubled from one year ago.
When asked which functional roles are most difficult to fill with
qualified candidates, Sales leads the pack with 34 percent reporting
it challenging. Information Technology, which surpassed Sales in Q1
for the first time since Q2 2013, fell back to second in Q2 with 32
percent citing it as difficult. Manufacturing Management, Accounting,
and Finance range from 27 percent to 22 percent, and Marketing and
Human Resources come in at 17 percent and 12 percent, respectively.
SMBs continue to report finding the least difficulty in hiring Legal
professionals, with only seven percent citing difficulty. Sixteen percent
of SMBs responded they had trouble in “other” areas of professional
and management recruitment.
Rate the level of difficulty your company faces in
finding qualified candidates for professional and
management positions.
Neither difficult nor easy
Easy
Extremely easy
31%
14%
Difficult
Extremely difficult
4%
1%
50%
Indicate which area of open positions are most
difficult to find qualified candidates.
Sales
Information Technology
Manufacturing Management
Finance
Accounting
Marketing
Human Resources
Legal
Other
34%
32%
27%
23%
22%
17%
12%
7%
16%
TOP ISSUES FACING SMBs
Since early 2013, SMB leaders have reported health care costs to be
of chief concern to their businesses. Having reached a survey high of
40 percent of SMB executives citing health care costs as their top
concern in Q4, the gap between health care and talent availability has
slowly narrowed. In Q2 2014, health care maintained the #1 spot with
33 percent, but talent availability concerns rose from 21 percent in Q1
to 28 percent in Q2. This increase is consistent with the findings that
SMBs are reporting the highest levels of talent acquisition difficulty in
Outlook history, with 64 percent reporting difficulty in hiring qualified
professional talent. (See above)
Health care costs and talent availability represent the top concerns
for 61 percent of the SMBs in our survey, but several other key
issues remain most important to the remaining near 40 percent.
Eighteen percent of SMBs report that competition from domestic
and international markets is their #1 concern, and another 12 percent
cite uncertainty in tax policy. Environmental regulation concerns have
historically been the least ranked, with only 8 percent reporting this
issue at chief concern in Q2 2104.
Please rank the following issues from top to
bottom based on the challenge they represent to
your company:
Health care costs
Talent availability
Domestic and
international competition
Uncertainty in tax policy
Environmental regulations
Other
33%
28%
18%
12%
8%
1%
(Multiple response allowed)

A Large
Impact
Some
Impact
A Little
Impact
IMPACT OF PATIENT PROTECTION AND AFFORDABLE CARE ACT
In addition to gauging top concerns in the SMB market, the Job
Generation Outlook surveys executives about their planning and
expectations for a variety of changes in the business and political
landscape. The survey asks SMB leaders about their companies’
preparations toward the implementation of the Patient Protection and
Affordable Care Act (Obamacare) and their projections regarding the
impact the law will have on their businesses.
The vast majority of respondents have consistently reported that they
expect Obamacare to have at least some level of business impact
(a “little”, “some” or “large” impact). After a slight dip in Q1 2014 to
87 percent expecting some level of impact, Q2 responses to this
question have ticked back up to more than 90 percent. One-third of
SMBs report the ACA will have a “large” impact on their company,
while 58 percent report that law will have “some” or “little” impact on
their operations.
In addition to impact, the survey looks at implementation preparation
levels. In Q2 2014, the highest percentage of SMBs (40 percent)
in survey history report that their companies have prepared and are
ready for the law’s full implementation. This number is up from only 18
percent one year ago. Similarly, while 57 percent reported in Q2 2013
that they were actively working on ACA preparation yet not ready, in
Q2 2014, that number has dropped to 44 percent. Only six percent
now say they have not done anything but that they plan to (down from
11 percent one year ago). Consistent with several past quarters, one
out of ten SMBs report that they have not and will not do anything in
preparation of the law’s full implementation.
How much of an impact will the Patient Protection
and Affordable Care Act have on your business plans?
How much preparation have you made for the
implementation of the Patient Protection and
Affordable Care Act in your business?
A lot of preparation, and we’re
ready for the implementation
We’re working on it,
but we’re not ready yet
We have not done anything
to prepare, but we plan to
We will not do anything
to prepare
40%
44%
10%
6%
33%
41%
17%
9%
No Impact
BABY BOOMER RETIREMENT
As members of the Baby Boomer generation continue to reach
retirement age – enabling millions of professionals to leave the
workforce over the next decade – the impact felt by these mass
retirements will be significant to many businesses. The SMB Job
Generation Outlook asks leaders to qualify the impact projected
retirements will have on their businesses.
Over recent months, impact levels have crept upward and this quarter
reached a survey high of 19 percent of SMBs expecting a “very big”
impact from the retirements of Baby Boomers. More than half of all
respondents expect at least “some” impact, and less than one-third
(29 percent) say that Baby Boomer retirement will not impact their
companies.
Describe the level of impact that Baby Boomer
retirement has on your company.
19%
52%
29%
Very big
impact
Some
impact
No impact
at all

IMPACT OF RETIRING BABY BOOMERS
SMBs are beginning to express that Baby Boomer retirements are
having, or will have, a measurable impact on their businesses – both
in potentially positive and negative ways. Since Q2 2013, SMBs have
reported that the creation of a knowledge gap, or “brain drain”, was
the chief effect felt by or expected from retirements. This retirement
consequence has far outpaced others for nearly a year. While the
knowledge gap concern again remained top choice (with 59 percent
predicting it will affect their business), the Outlook saw a continued
uptick in the percentage of SMB leaders who also foresee other
retirement effects.
In addition to knowledge concerns, SMBs reported an increase in
positively perceived effects. Twenty-seven percent reported that
retirements enhance their prospects for future innovation and growth
(up from a survey low of 17 percent in Q3 2013), and 34 percent
predict that retirements will improve their ability to consider new
approaches or processes. While up from the previous three quarters,
each remains several points off their survey high, both recorded one
year ago. Of least concern each quarter is that retirements will impair
companies’ abilities to compete in the market, with only 12 percent of
Q2 respondents reporting that concern as a projected impact.
HIRING MILLENNIALS
Closely related to SMB hiring plans and Baby Boomer retirement
effects is the relationship these topics have with the Millennial
workforce. With unemployment rates consistently higher than the
average population’s, Millennial job opportunities continue to be a hot
bed of discussion. To study connections, the SMB Job Generation
Outlook asks business leaders what – if any – plans their companies
have in place related to Millennial hiring.
According to Q2 2014 data results, the majority (66 percent) of SMBs
surveyed do not have any formal plans to specifically recruit Millennial
candidates over the next several months. Twenty-five percent of SMBs
report that they plan to specifically target Millennials in the coming
quarter for hire, and nine percent report an effort to actually hire
fewer candidates from the Millennial workforce pool. The SMB Job
Generation Outlook will continue to survey business leaders regarding
this topic and consider the effects that Baby Boomer retirements and
Millennial candidates exert upon one another.
In the next quarter, are you going to make an
effort to:
Describe how the retirement of Baby Boomers
impacts your company. (multiple responses allowed)
Creates a knowledge gap
that’s difficult to bridge
Improves our ability to consider
new approaches & processes
Enhances our prospects for
future innovation and growth
Impairs our ability to compete
Other
59%
34%
27%
12%
2%
25%
66%
9%
Hire more
Millennials
Hire fewer
MillennialsNo formal plan
to do either
With unemployment rates among veterans continuing to outpace
the general population, workforce issues and jobs programs remain
a topic of national, state, and local discourse. Despite estimates
that three million veterans have returned from service over the past
decade and another million are expected to return to civilian life in
the next five years, the majority of surveyed SMBs report having no
specific plan to recruit or hire military veterans.
Seventy-two percent of SMBs are open to hiring vets, yet take no
specific actions. Only 17 percent of responding SMBs say their
companies have a specific plan in place to hire veterans. Eleven
percent of SMBs say they do not and will not target veterans for hire
in the coming months.
No, we will not hire
military veterans
We hire military
veterans but don’t have
a specific plan
Yes, we have specific plans
to hire military veterans 17%
72%
11%
HIRING VETERANS
Do you have specific plans to recruit and/or hire
military veterans in the next quarter?

11%
31%
12%
19%
27%
MINIMUM WAGE
As business leaders, politicians, and economic experts continue
to debate policies regarding raising the minimum wage, American
SMBs are regularly cited as a critical business sector that could be
negatively affected by such increases. In Q1 2014, the Outlook asked
SMB executives about the potential impacts a federal minimum wage
increase to $10.10 per hour would have on their companies. Slightly
more half (52 percent) reported that an increase to $10.10 would have
no impact – neither positive nor negative – on its business. Dipping
only slightly to 49 percent, that number did not statically change in the
Q2 survey.
Of those SMBs citing some level of impact, the largest percentage
(25 percent) reported that a wage raise would result in an increase
of pricing to their end customers, similar to last quarter’s 26 percent.
Allowing for multiple responses, the Q2 2014 survey also revealed that
a $10.10 minimum wage would create some level of negative hiring
effect for 44 percent of SMBs. Twenty-two percent would reduce
current hiring plans (up three points from last quarter) and seven
percent would eliminate all new hiring (no change from last quarter).
Fifteen percent of respondents report that a $10.10 minimum wage
increase would lead them to reduce current workforce numbers. As
in Q1, three percent of SMBs surveyed in Q2 believe they would not
be able to stay in business should the $10.10 per hour minimum wage
become law.
As the question of minimum wage is a complicated and multi-faceted
economic issue, much discussion also centers on the question, “How
much is the right amount?” Survey respondents were asked to use a
sliding scale to provide an opinion on where they would ideally like to
see the minimum hourly wage set. Their responses appear to show an
appetite – to some extent – among SMBs for increasing the minimum
wage, with an ideal mean minimum wage of approximately $9.10 an
hour. While 31 percent wished to keep the rate between its current
$7.25 per hour and $8.20 per hour, 46 percent of respondents felt that
the $8.21–$10.10 (the rate proposed by the White House) range was
most ideal. Interestingly, 23 percent of SMB leaders chose answers
in the rate range of $10.11–12.00 as most ideal – going beyond the
proposed $10.10 increase.
If the minimum wage was to increase to $10.10 per
hour, what impact would that have on your business?*
Using the sliding scale below, where would you ideally
like to see the minimum hourly wage set?
We will increase prices to our end customers
We will reduce our new hiring plans
We will reduce our current work force
We will eliminate all new hiring
We will not stay in business
Increasing the minimum wage
will not impact my business
Other
Don’t know
25%
22%
15%
7%
3%
49%
3%
3%
*Multiple Responses Allowed
$7.25–$8.20 $8.21–$9.15 $9.16–$10.10 $10.11–$11.05 $11.06–$12.00
CONTRACT OR PERMANENT EMPLOYEES?
American SMBs continue to demonstrate a desire to hire permanent
employees into their companies. Despite worries that increasing
health care costs would encourage more businesses to seek contract
workers over permanent workers, SMBs have consistently favored a
permanent or combination approach. Only seven percent are looking
to hire contract workers only. This is the lowest level in survey history
and off 6 points from the Q3 2013 high of 13 percent. Thirty-six
percent of SMB leaders say their companies will hire only permanent
employees in the coming months, and another 33 percent report
planning to hire a combination of permanent and contract workers.
Twenty-four percent of respondents don’t specifically plan to hire
either next quarter, the second highest reported “neither” number in
the past year.
Describe the type of employees your company is
considering adding in the next quarter.
33%
Combination of
contract and
permanent
employees
24%
Neither
contract nor
permanent
employees
36%
Permanent
employees only
7%
Contract
employees
only

> THE U.S. SHOULD EASE REQUIREMENTS FOR SKILLED
WORKERS IN IT, SCIENCE AND OTHER HIGH-DEMAND FIELDS.
Agree strongly
Agree
Disagree
Disagree strongly
14%
32%
25%
18%
11%
> THE U.S. SHOULD EASE REQUIREMENTS FOR SKILLED
LABORERS IN MANUFACTURING.
Agree strongly
Agree
Disagree
Disagree strongly
8%
30%
27%
22%
13%
> THE U.S. SHOULD EASE REQUIREMENTS FOR ALL
IMMIGRANTS, NOW AND IN THE FUTURE.
Agree strongly
Agree
Disagree
Disagree strongly
5%
16%
20%
26%
33 %
> THE U.S. SHOULD EASE REQUIREMENTS ONLY FOR
IMMIGRANTS WHO ARE ALREADY LIVING IN THE U.S..
Agree strongly
Agree
Disagree
Disagree strongly
7%
22%
23%
26%
22%
IMMIGRATION REFORM
As immigration concerns and proposals for reform to both policy and
law continue to be a divisive and hotly debated topic across America,
SMBs have consistently reported moderate support of at least some
action toward restructuring the U.S. immigration system. Overall
support for easing immigration requirements, however, appears to
have cooled from one year ago.
Less than half (46 percent) of SMBs surveyed agree with the
statement that the U.S. should ease immigration requirements for
skilled workers in IT, science, and other high-demand fields. This
number is down nine points from last quarter and only one point up
from the survey low of 45 percent, cited in the Q2 2013 survey. One-
quarter of SMBs maintain a neutral position regarding immigration for
this skilled professional set, and 29 percent disagree with the proposal
to ease requirements. This is the highest reported disagreement in the
Outlook’s history.
Immigration easement support drops when considering other
population sets, and in Q2 2014, runs about even between agreement
and disagreement when considering skilled laborers for manufacturing.
Thirty-eight percent of Q2 respondents agree with the statement that
the U.S. should ease requirements for manufacturing talent, down six
points from Q1 and the lowest support rate recorded in the past year
and half. In relation, 35 percent disagreed with the idea of easing
manufacturing talent immigration requirements in Q2, up 12 points
from one year ago.
SMB support for easing immigration requirements plummets when
considering either immigrants already living in the U.S. or all immigrants,
now and in the future. In both instances, more SMB leaders disagree
with easing requirements (48 percent and 59 percent, respectively)
than agree.
How much do you agree or disagree with the following proposals for immigration reform?
BIPARTISANSHIP
The majority of American SMB leaders (67 percent) continue to
report a feeling of pessimism regarding the prospects of effective
bipartisanship in the federal government. According to the Job
Generation Outlook, two-thirds of SMB executives consistently
say that they are somewhat or very pessimistic about near-term
cooperation in Washington. This number has remained steady over
the past year and a half. In relation, the percentage of SMB leaders
who report feeling very optimistic has reached an historic low, at only
two percent. Another 11 percent report feeling somewhat optimistic
about bipartisan efforts at the federal level, and one in five say they
have no opinion either way.
While SMB executives have historically reported higher rates of
optimism regarding state bipartisanship efforts (versus federal), that
gap narrowed somewhat in Q2. Optimism about state bipartisanship
reached a survey low in Q2 of 12 percent, down from its 19 percent
high in Q3 2013. Similarly, state bipartisanship negativity saw a four
point uptick in Q2 to 56 percent.
The intensity of pessimism in state versus federal government varies.
Whereas 43 percent (of the total 67 percent) of SMBs report being
very pessimistic about cooperation in Washington, the intensity
of negativity lessens at the state level, with pessimism numbers
evenly split, 28 percent somewhat pessimistic and 28 percent very
pessimistic.
Very optimistic
Somewhat optimistic
Very pessimistic
2%
10%
32%
28%
28%
> BIPARTISANSHIP IN STATE GOVERNMENTS
> BIPARTISANSHIP IN FEDERAL GOVERNMENT
Very optimistic
Somewhat optimistic
Very pessimistic
2%
11%
20%
24%
43%

WORKFORCE (IN FTES) INCREASES OVER LAST QUARTER
Of the SMBs reporting increases to their workforce and fully burdened-
expenses last quarter, fewer saw significant increases of more than 15
percent to their total costs, with those reporting high-level increases
dropping from 40 percent in Q1 to 32 percent in Q2. In relation, 42
percent of SMBs reporting expense increases in Q1 experienced an
increase in expenses of less than 10 percent, and in Q2, that number
rose to 53 percent. More SMBs saw increases in the 5 to 10 percent
range than any other, with 34 percent.
For those expenses that increased, select the percent
they increased.
<5% 5% - 10% 11% - 15% 16% - 20% 21% - 25% >25% Don’t
Know
18%
5%
19%
9%
15%
34%
As part of the Q2 2014 survey, SMBs reported similar ratios in
changes to workforce and fully-burdened expenses as they had
the past several quarters. Slightly over half (53 percent) reported
that their company’s workforce related expenses increased, with 47
percent of SMB leaders reporting a slight increase and six percent
reporting a dramatic increase. Thirty-six percent reported no change,
and 11 percent reported decreases, with one percent citing those
decreases as dramatic.
CHANGE IN WORKFORCE AND FULLY-BURDENED EXPENSES
Describe how your workforce and fully-burdened
expenses changed last quarter.
Increased
dramatically
Increased
slightly
Stayed
the same
Decreased
slightly
Decreased
dramatically
1%
6%
10%
36%
47%
WORKFORCE (IN FTES) DECREASES OVER LAST QUARTER
While 88 percent of SMBs reported either no change or an increase
in workforce and fully-burdened expenses, 12 percent of survey
respondents reported decreases to their expenses. That overall
percentage has changed only slightly over the past three quarters,
but the make-up of those decreases shifted in the Q2 survey. The
decreases SMBs witnessed in this past quarter were more significant
than in past quarters. Both Q4 2013 and Q1 2014 surveys revealed
that of those whose expenses decreased, more than 60 percent did
so at less than 10 percent of their total costs. In comparison, SMBs
reporting a decrease in this past survey did so at an essentially even
split, with 35 percent reporting decreases of 10 percent or less, 34
percent reporting an 11 to 20 percent decrease, and 31 percent
saying their expenses decreased significantly (more than 21 percent).
For those expenses that decreased, select the percent
they decreased.
<5% 5% - 10% 11% - 15% 16% - 20% 21% - 25% >25% Don’t
Know
22%
9%
22%
18%
16%
13%

COMPANY SIZE
Fifty-three percent of Q2 respondents were from mid-sized
businesses with 100-999 employees. Twenty percent of
respondents reported employing between 1,000 and 4,999
people. Seven percent represented the largest sector of the
SMB with 5,000 or more employees, and 20 percent of business
executives reported workforces of fewer than 100 employees.
Select the number of workers your company
currently employs.
1 – 99
100 – 499
500 – 999
1,000 – 1,499
1,500 – 4,999
5,000 – 9,999
10,000 or more
20%
37%
16%
8%
12%
2%
5%
INDUSTRY
Representing a cross-section of U.S. industries, Q2 2014 Outlook respondents reported working in more than 15 different business sectors,
including Manufacturing, Financial/Insurance/Real Estate, Health Care/Medical, Business Services, and Information Technology.
Select your company’s industry.
2% Arts, Entertainment & Recreation
4% Automotive
7% Business Services
5% Construction
5% Consumer Services
5% Energy, Oil, Gas & Utilities
13% Finance, Insurance, Real Estate
8% Health Care/Medical
7% Information Technology
3% Legal Services
22% Manufacturing
3% Nonprofit & Membership Organizations
2% Telecommunications
4% Transportation Services
1% Pharmaceuticals
9% Other
LENGTH OF TIME IN BUSINESS
The SMB Job Generation Outlook survey included 400 executives
from long-standing U.S. businesses, with 66 percent of Q2
respondents having been in business for more than 20 years.
Another 29 percent have been in business from 6-20 years and only
five percent have been newly founded within the past five years.
How long has your company been in business?
More than 20 years
11 – 20 years
6 – 10 years
3 – 5 years
0 – 2 years
66%
22%
7%
4%
1%
TYPE OF COMPANY
Describe your company’s ownership structure.
62%
Private
21%
Public
12%
Family-
owned
5%
Private equity
portfolio
company

LOCATION OF COMPANY
The Q2 2014 SMB Job Generation Outlook surveyed business leaders from 38 states, with the strongest concentrations of respondents
from California, New York, Texas, Florida, and Illinois.
Mid-Atlantic
23%
Midwest/Great Plains
22%
West/Southwest
33%
Southeast
14%
Northeast
8%
Lucas Group SMB Job Generation Outlook Survey
Q2 2014 Closing Remarks
Over the past six quarters, Lucas Group has surveyed more than
1,500 small to mid-sized business executives via the SMB Job
Generation Outlook. Published quarterly, the Outlook seeks to uncover
and report upon the business opinions and market expectations of
the SMB’s highest level officers. Focused intentionally on C-level
executives and business owners, the Outlook addresses an array of
significant topics, including the economy’s health, employment trends,
political issues, and SMB-specific growth plans.
Q2 2014 Outlook respondents represented 38 states and a variety
of industries. From Manufacturing and Business Services to Health
CareandInformationTechnology,theseSMBexecutivesknowledgably
characterize the foundation of the U.S. economy and workforce. The
majority of reporting companies are long-standing businesses with
more than 20 years in operation, employee workforces between 100-
1,500 and 2013 corporate revenues between $50M-$600M.
Overall, the survey revealed that small to mid-sized business
leaders are generally optimistic about opportunities in the U.S.
economy and the SMB sector. They express positivity regarding job
creation, economic growth, and the health of their own companies.
For those SMBs who report plans to hire, many plan to do so in
increasingly larger numbers, proportional to their workforces. As with
past quarters, SMBs do not, however, reveal similar optimism about
the U.S. political landscape or bipartisan efforts.
More SMBs reveal “big” hiring plans
Forty-five percent of American SMBs surveyed report plans to hire
additional employees in the next few months. Up from 38 percent in
Q3 2013, this number remained steady from Q1 2014. The number of
SMBs who report plans to downsize their workforces in the coming
quarter dropped again in Q2 to an Outlook low of nine percent.
Of those businesses looking to hire new workers, more are
planning to do so in larger numbers than during the past year and
half. Nearly one-quarter (24 percent) of growing SMBs report plans
to increase their total current workforce by more than 26 percent,
doubling projections from Q1 2014. Of those, 13 percent plan to
increase their full workforce by more than 50 percent. These numbers
have increased steadily over the past several quarters. Similarly, the
number of SMBs planning to increase their workforce by less than 10
percent has dropped 20 points, since reaching a survey high in Q3
2013 of 74 percent, to slightly more than half in Q2.
SMBs continue to demonstrate greater optimism when asked
about longer-term hiring plans. Fifty-seven percent of SMBs plan to
hire in the next 12 months (up from 45 percent planning to hire in the
next quarter). Again, those planning to increase their total workforce
numbers are looking to do so in big ways, with 20 percent planning
increases of more than 26 percent of total workforce, up 8 points
over last quarter alone. Relationally, those planning to downsize – both
Continued next page...

For more information regarding the
SMB Job Generation Outlook, please visit
www.lucasgroup.com/smb-job-generation
in the next quarter and over the next 12 months – are planning to
do so with less overall impact, with 85 percent and 78 percent of
those SMBs planning to reduce workforces by less than 10 percent
respectively.
Growing Concerns over Retirements
and Talent Availability
SMBs report that forthcoming Baby Boomer retirements will
increasingly affect their organizations. While the overall percentage
of SMBs projecting impact from retirements has remained steady,
the ratio of expected influence has shifted. More than 70 percent
of Q2 respondents expect to experience some level of impact from
Baby Boomer retirement, with 19 percent now projecting a “very big”
impact. This greater projected impact represents an eight point jump
from one year ago and an SMB Job Generation Outlook high.
Additionally, SMBs are reporting increasing difficulty in finding
and hiring qualified talent for key professional functionalities. The Q2
2014 survey revealed a widening gap between businesses who hire
easily and those who struggle to identify and recruit ideal talent. Only
five percent of SMB leaders report that talent acquisition is currently
“easy” for their company, off from nine percent reporting ease six
months ago. Sixty-four percent (an Outlook high) report some level
of difficulty in hiring, with 14 percent (also a survey high) saying
that qualified professional talent acquisition has become “extremely
difficult” for their company.
While Baby Boomer retirements and talent availability are
increasingly impacting small to mid-sized businesses and more
SMBs are planning to hire in large numbers, most Q2 2014 survey
respondents report no specific plans to recruit or hire from Millennial
or veteran candidate pools. This lack of specialized recruitment
planning may reveal greater potential difficulty in the coming months
for SMB growth and workforce management.
The SMB Job Generation Outlook will continue to monitor the
business impacts of retirement, talent availability, and candidate-
focused recruitment plans that may affect the sector’s ability to find,
hire, and retain qualified professional talent. Noting these challenges,
the survey will also continue to gauge how SMB leaders plan for and
manage the changing economic, political, and workforce landscape.

Q2 2014 SMB Job Generation Outlook Report

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Q2 2014 SMB Job Generation Outlook Report