Large corporations are recovering from the recession and seeing sales increases. So far, most small businesses are not.
The chart below shows the 2010 Q2 year-over-year sales growth for the S&P 500 (a large company stock index) compared to similar data for small businesses. The small business data comes from Intuit Trends, a small company index constructed by Intuit Corporation using financial data from roughly 135,000 small businesses.
In response to the sales declines, the Intuit Trends Index shows small businesses cut expenses by 27%. The good news is the cost cutting resulted in small businesses being able to improve their margins and profits in Q2 versus a very bad Q2 in 2009.
Large companies have been able to grow revenues primarily because of their exposure to stronger international markets. They also have better access to credit and are benefiting from global stimulus spending – most of which flows to large corporations.
The implications of this data are pretty clear. The small business economy is still in recession and will continue to be until small business demand picks up.
Small businesses are a key source of U.S. jobs. As long as they are in a slump, job growth will be weak and U.S. unemployment will remain high.
Notes on the data:
The S&P 500 data is from Fidelity’s Q2 Earnings Update.
The Intuit Trends data is created from online users of Intuit financial products. The index is not statistically representative of the overall U.S. small business sector. But we consider it strongly “directionally correct” because it is based on actual financial data from a large number of small businesses. Access to the index is free, but registration is required.
Disclosure: Intuit is an Emergent Research client.