Nearly Half Of CEOs Pledged Their Personal Funds To Survive The Economic Downturn
Small business CEOs expressed a remarkable resurgence of optimism both in the overall economy and for their own companies. The Vistage Confidence Index jumped to 106.3 in the 4th Quarter of 2010, after reporting 95.1 in the 3rd quarter, 94.4 in the 2nd quarter and 93.7 in the 1st quarter of this year. Of the 1,729 respondents in the Q4 Vistage CEO Confidence Index, 77% expect increased revenues and 63% foresee higher profits in their own companies. Fifty-four percent expect to hire more employees in the coming year, which is the first time in three years that the majority of CEOs planned to expand the number of jobs. While CEO confidence had been rising incrementally for seven consecutive quarters, the fourth quarter surge was due in large part to the reduction of economic and political uncertainties following the mid-term elections and a belief that these CEOs’ companies are well positioned for the future.
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According to Vistage International Chairman of the Board and CEO Rafael Pastor, the Q4 results reflect the commitment and perseverance of our nation’s small business CEOs. “Nearly half the CEOs surveyed pledged their personal assets to keep their companies running, their people employed, and our economy from collapsing. They are the unsung heroes of our economic recovery and the brighter days ahead,” Pastor said.
The nationwide survey was conducted from December 14 – 24, 2010. University of Michigan’s Dr. Richard Curtin, who has directed the Vistage CEO Confidence Index Survey since its inception in 2003, provides the following additional analysis of the results:
Recovery Expected to Accelerate. The turnaround in confidence has been significant. At the depths of the recession in late 2008, 97% of all CEOs judged economic conditions were in decline; in late 2010, just 7% reported continued declines. When asked about future prospects for the economy, 58% in the 4th quarter 2010 survey expected improvement during the year ahead compared with just 5% who expected any further declines. This was the most favorable outlook for economic growth since the start of 2004.
More Jobs Creation Ahead. The majority of firms in the 4th quarter survey (54%) planned on adding employees to handle increased sales. This was the first time the majority planned to expand the number of jobs in three years. Just one-in-twenty firms expected to trim their workforce in 2011. While there were some firms that planned to hold back on hiring permanent employees due to uncertainties about the overall economic outlook and future demand, the majority did not expect to hire temporary employees in 2011.
Revenues Expected to Increase. Revenue growth was expected by 77% of all firms in the 4th quarter survey, up from 59% one year ago and 36% two years ago. Just 5% anticipated declines in revenues, the lowest proportion in five years. Given that six-in-ten firms expected no increase in the prices they charged, most of the revenue gains were expected to be from increased sales. The relative inability to pass along cost increases to their customers meant that managing costs was a top priority for one-in-five firms. Another one-in-four firms placed greater emphasis on maintaining or expanding their customer base.
Profit Rise Anticipated. Increased profits during 2011 were anticipated by two-thirds of all firms, up from just one-in-three CEOs who expected rising profits at the lowpoint two years ago. There were a number of issues that firms believe will limit their profitability, including the impact of the new health care legislation and continued limits on the availability of credit. However, firms thought that their enhanced profitability in 2011 would mainly stem from greater sales prospects they now faced due to the upturn in the economy.
Investment Plans Improve. Planned investments in new plant and equipment continued to grow in the 4th quarter 2010 survey. Among all firms, 46% planned to increase their investment spending, up from 34% one year ago. Just one-in-ten firms expected no increase in their fixed investments in 2011, down from a peak of 44% two years ago. While there remains some uncertainty about whether the strength in their future sales would be long lasting, the investments now planned by CEOs have increasingly reflected the likelihood that growth in their firm’s sales would justify those investments over the foreseeable horizon.
About the Vistage CEO Confidence Index
The quarterly Vistage CEO Confidence Index, established in 2003, is the nation’s largest and most comprehensive report of the opinions and projections of small- to medium-sized business CEOs about the U.S. economy. The Q4 2010 Vistage CEO Confidence Index includes responses from 1,729 US CEOs, surveyed between December 14 and December 24, 2010, with a margin of error of 1.6 percentage points. Since its establishment in 2003, the Index has been proven to be (or has established use of as) a reliable harbinger for changes in GDP and Employment Expectations.
About Vistage International
Founded in 1957, Vistage International, Inc., headquartered in San Diego, California, is the world’s leading chief executive organization, serving more than 14,000 members in 15 countries. Vistage member CEOs participate in chair-led advisory board peer groups, receive one-to-one coaching, learn from expert speakers, and interact among a global network of CEOs from a broad range of industries. In a 2010 analysis, Vistage CEO member companies in the U.S. substantially outperformed in growth the average comparable Dun & Bradstreet companies over the last five years.
CONTACT: Leo Bottary, Vistage International, Inc., +1-858-509-5854, firstname.lastname@example.org
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