How entrepreneurs see 2006's second half

Dunkelberg: It's the same thing and [it's] of course tied to energy. I'm still not sure ... how much consumers can ignore it. Whether they will cut back on spending to pay for [increased] fuel [costs] remains a major uncertainty. There are still fundamental concerns about spending and the gross domestic product. [But] money in the door forgives a lot of mistakes and problems, including higher energy costs.

Hennessey: I personally don't think there will be significant increases in capital investments, because there are too many unknowns right now about interest rates and gas prices. My friends who are entrepreneurs ... are concerned about [maintaining] their current level of business.

Sobbott: We're seeing a little bit of a positive indicator with 58% of small businesses increasing their investments, which is up eight points from six months ago. Also, when we asked in general about making new capital investments in the next six months, 64% said yes.

Horan: We are seeing small businesses invest in hard technology, computers and networking systems, Internet marketing, hiring, and [additional] floor space.

Have your thoughts on hiring trends shifted in the first six months?

Hennessey: People are concerned about maintaining their current business and keeping current employees. That's one of the reasons they may be paying a little bit more [in salaries] than in the past.

Sobbott: Hiring plans are flat from where we were in the fall. We're seeing that 39% of small businesses plan on hiring in the next six months, just up from 37%. Most businesses say that they plan on hiring to accommodate the growth or volume in their business, but the No. 1 issue they have is finding good staff.

Horan: We are seeing more and more demand for ideas about how to use Internet job boards like monster.com and craigslist.org more efficiently. [Businesses] get hundreds of résumés but almost all of them are garbage.

Energy costs were a big concern at the outset of the year. How has that played out and how will it continue to impact small businesses?

Hennessey: [Gas] is now 50 cents higher in price. I think it's hitting people more now than before. And when you look at all the costs together: gas, higher capital, and any [increased] borrowing [rates]; it's not clear that [small businesses] can pass it on in higher prices.

Evanger: Manufacturing prices have increased across the board. To cover that [increase], sometimes the [result] is that the quality can suffer. In the past seven years manufacturers haven't really raised prices on furniture, but over the past year and a half we've seen prices going up every six months.

Sobbott: Small businesses are definitely feeling the impact of energy costs. They are still very careful about passing along the expense. They are looking to other means to accommodate the increase in energy costs. The number of small businesses [that told us] that they reduced their energy usage was up 12 points to 42%. Last fall it was 30%.

Horan: It has affected small business in two ways, and they are both negative. They feel it on the [incoming] revenue line and they have a hard time passing it on to customers. They are being squeezed on both ends.

Where does health insurance now stand?

Dunkelberg: It continues to be a problem. The cost of coverage is not rising as fast [as it was], but it is still the No. 1 problem facing businesses today -- [above] anything else, including gas prices.

Evanger: It is a constant struggle for a small business [with few employees] to be able to provide competitive benefits. Yet small businesses employ a huge percentage of the [workforce]. Why it is so challenging to [allow us] to band together is beyond me. This will change as more people become employed by small businesses [because] our voice will be [louder] and politicians [will have to] listen.

Sobbott: It continues to be one of the toughest things to deal with, and it relates closely to hiring plans and being competitive in the marketplace. We're seeing the number of businesses offering health care remaining flat at 56%, up from [only] 55% in the fall.

What trends do you see emerging?

Hennessey: I still see [funds flowing toward electronics and communications]. Small businesses are pretty quick to use ... the Internet [for] communication or sourcing materials, new ideas, or just keeping up to date.

Sobbott: Businesses are getting used to dealing [with a state of] limbo. They are focusing on trying to control what they [do know] and how to be more competitive and [are] zeroing in on customer service.

Horan: We are seeing the move toward Internet marketing really happening. Small businesses really like [its] efficiency [and ability] to drive their businesses.

Looking at the second half of 2006 are you still optimistic?

Dunkelberg: I am still optimistic.

Hennessey: I am more cautious now.

Sobbott: We're still cautiously optimistic. I don't think we've seen anything dramatically shift from the last time we spoke.

Horan: I remain generally optimistic. If [Federal Reserve Chairman Ben S. Bernanke] announced he was through with rate increases and there was some relief in oil prices, I would move to being very optimistic.

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