The market sentiment of small business owners has been on the rise recently. According to the NFIB Small Business Optimism Index, sentiment among small business owners rose by eight points in November to 101.7. This is after 34 straight months of remaining below the 50-year average of 98. It’s also the highest reading since June 2021.

We’re still running our own survey to see how the custom integration industry in particular is feeling at this point in time, and, considering how many small businesses make up the industry, we’ll have to see how integrator sentiment matches up when that comes out in January.

It’s not all sunshine, however, as, immediately after hitting that high, the index shed 12 points moving on into December, dropping to the 98 average.

“The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners,” said NFIB Chief Economist Bill Dunkelberg.

“Main Street also became more certain about future business conditions following the election, breaking a nearly three-year streak of record high uncertainty. Owners are particularly hopeful for tax and regulation policies that favor strong economic growth as well as relief from inflationary pressures. In addition, small business owners are eager to expand their operations.”

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Small Business Owners Believe Now is the Perfect Time for Expansion

Breaking down the data more, the net percentage of owners expecting the economy to improve rose 41 points from October to a net 36%. Meanwhile, the net percentage of small business owners believing it is a good time to expand their business rose eight points to a net 14%.

The frequency of reports of positive profit trends was a net negative 26% (seasonally adjusted), however, that was up seven points from October and the highest reading of this year.

Among owners reporting lower profits, 32% blamed weaker sales, 18% blamed the rise in the cost of materials, 13% cited labor costs, and 9% cited lower selling prices. For owners reporting higher profits, 53% credited sales volumes, 21% cited usual seasonal change, and 13% cited higher selling prices.

On the upside, the net percentage of owners expecting higher real sales volumes rose 18 points to a net 14% (seasonally adjusted).

Twenty-eight percent (seasonally adjusted) plan capital outlays in the next six months, up six points from October. Of those making expenditures, 39% reported spending on new equipment, 22% acquired vehicles, and 14% improved or expanded facilities. Twelve percent spent money on new fixtures and furniture and 7% acquired new buildings or land for expansion.

Inflation Has Grown to be Single Largest Issue Among Small Businesses

Twenty percent of owners reported that inflation was their single most important problem in operating their business (higher input and labor costs), which surpassed labor quality as the top issue by one point.

The net percentage of owners raising average selling prices rose three points from October to a net 24% seasonally adjusted. Unadjusted, 11% reported lower average selling prices and 32% reported higher average prices.

Price hikes were the most frequent in the wholesale (50% higher, 4% lower), finance (46% higher, 4% lower), retail (43% higher, 3% lower), and services (35% higher, 10% lower) sectors. Seasonally adjusted, a net 28% plan price hikes in November.

Thirty-six percent (seasonally adjusted) of all owners also reported job openings they could not fill in the current period, up one point from October. Of the 55% of owners hiring or trying to hire in November, 87% reported few or no qualified applicants for the positions they were trying to fill.

In comparison, integrators at the beginning of 2024 were of much the same opinion in terms of growth potential, expecting median annual revenue growth of 9.1% in 2024. CEDIA also offered a similarly rosy forecast with revenue growth forecast by company size being 9% for integration firms that earn $14+ million; 24% for those earning $1M to $4M; and a whopping 33% for integrators with less than $1 million in annual revenue. In terms of potential threats to business, however, integrators ranked economic slowdown as the leading concern, ahead of rising labor costs, inflation, labor shortage, and unprofessionalism in the industry.

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