Advertisement

The Outlook: : Orange County’s Small Businesses Expect 1988 Sales to Outpace Those of 1987 . . .

Share
Times Staff Writer

Business at Deanne Finck’s lumber and home center--a good indicator of the health of the economy in Orange County, which is tied so closely to residential development--is expected to be better than ever next year.

Finck’s faith is supported by a newly released survey of small businesses that reports 84% of small business owners in Orange County expect their sales to be up at least 5% in 1988, despite volatility in the nation’s stock markets and recent gloomy economic predictions by economists.

In contrast, just 67% of small-business owners nationally expect sales to increase 5% or more next year, according to the survey, which was conducted by the accounting firm of Arthur Andersen & Co. The firm surveyed 8,000 U.S. businesses, including about 200 in Orange County.

Advertisement

Richard C. Bigelow, partner in charge of the small business practice of Andersen in Costa Mesa, said: “Orange County traditionally tends to be more bullish, and there’s a feeling here of insulation from the nation’s economy. But nationally, the business people also feel very positive.”

“Business is good, so why should we think things are going to get bad,” was a typical reaction from several small business owners asked by The Times for their response to the Andersen study.

But even though Orange County businesses appeared in the survey to have a rosier outlook for next year than the nation as a whole, slightly fewer businesses locally--65%--than nationally--67%--reported that sales actually increased this year.

And the number of Orange County-based businesses expecting to add to their staffs is considerably smaller than the number expecting increased sales activity--a sign, experts said, that cautious optimism is the order of the day.

Fifty-seven percent of the Orange County respondents said they expect to add workers in 1988, contrasted with 42% who actually increased their payrolls this year. Nationally, 52% of all respondents said they expect to increase their work forces in 1988, and 38% reported increases for 1987.

At Deanne Finck’s three Plains True Value Home Center stores in Orange County, revenue is expected to rise by about 6%. But, Finck said, “I don’t see any great reason to plan for expansion” at the stores, which now employ 80 workers.

Jeanette Bean, president of Bean Travel in Santa Ana, said that 1987 has been the best year ever for her 9-year-old company and that she expects business to be up again next year.

Advertisement

“I’m not surprised that others are saying the same thing,” Bean said.

Still, Bean--who added a fourth staff member and bought two new computers in 1986--did not expand materially this year and said she doesn’t plan to expand in 1988.

“We’ll work harder next year, but I’m comfortable with the size of my business,” she said. Neither Bean nor Finck were participants in the Andersen survey.

The large gap locally between businesses that expect sales increases next year and those that expect to enlarge their staffs shows that “small business people are being prudent,” said Sandy Sutton, business development officer of the Orange County office of the U.S. Small Business Administration in Santa Ana.

Sutton said loan requests to the SBA have not slowed down because of the stock market’s recent volatility, and she said she doesn’t foresee a slackening demand.

Mark S. Stein, president of Strategic Resources, a Laguna Hills-based management consultant, said the outlook of small-business owners might be based on the current interest rates. “As long as the small-business owner can borrow money (at low rates), the owner expects business to do well.”

Other findings of the Andersen survey in Orange County included:

- Forty-one percent of local businesses believe it is getting increasingly difficult to find financing, while 46% believe that the situation really hasn’t changed much in recent years.

Advertisement

- Forty-one percent of the respondents believe business ethics are degenerating, and just 4% believe they are improving.

- Liability insurance premiums are an increasingly big part of the cost of doing business, with all respondents reporting increases in premiums and 21% reporting increases of 50% or more.

In comparing Orange County businesses’ responses to those from the rest of the nation, the survey shows that they operate more globally here than businesses elsewhere.

While just 30% of the respondents nationally said that some of their business comes from exports, 42% of the Orange County respondents reported export revenue.

Orange County businesses are also affected more often by ethical problems than businesses in the rest of the country, the survey showed. Fifty-one percent of the respondents said they have been adversely affected by what they considered to be questionable business practices, contrasted with 39% nationally.

Of the local businesses concerned with ethics, 20% said they had been affected by infringement of patented technology--compared to 12% nationally--while 34% said conflicts of interest were a problem, contrasted with 25% nationally.

Advertisement

Bigelow, the local Andersen manager, attributed the high incidence of ethics problems to the nature of business in Orange County, which is made up of many small, high-technology firms.

Foreign companies are responsible for a great deal of patent infringement against local businesses, he said. Bigelow said the problem can be improved if business owners are aware of what they can do to protect patents, and if governments are more responsive to enforcing patent protection laws.

SMALL BUSINESS OUTLOOK According to an Arthur Andersen & Co. survey, small business operators in Orange County are more optimistic than their counterparts across the country in their forecasts for 1988.

SALES O.C. Nat’l Up more than 10% 67% 41% Up 5% to 10% 17% 26% Up to 5% 4% 15% Stay the same 6% 13% Decrease 6% 5% PROFITS Up more than 10% 39% 25% Up 5% to 10% 24% 21% Up to 5% 12% 20% Stay the same 16% 25% Decrease 9% 9% EMPLOYEES Up more than 10% 20% 13% Up 5% to 10% 16% 13% Up to 5% 21% 20% Stay the same 38% 47% Decrease 5% 7%

Advertisement