2016 Virginia Business Leaders Poll

The Roanoke College Institute for Policy and Opinion Research (IPOR) conducted its first Virginia Business Leaders Poll in which 310 CEOs of Virginia companies with sales of at least $5 million in the last year were asked a variety of questions pertaining to the local and national economy and business climate.

As a whole, business owners express more optimism than pessimism, particularly concerning the business climate in the near future. Optimism varies by business size, industry, and region. CEOs are cautious and anticipate expansions to largely be within their current markets rather than seeking new markets and products.

Business owners are particularly concerned about health care costs, taxes, and government regulation. Federal legislation is a concern to many, particularly the impact of health care legislation. CEOs also see a wide skills gap between job openings and applicants.

Business leaders cautiously optimistic about the future

Thirty-six percent of respondents report current business and economic conditions are better today than six months ago while 20 percent say things are worse [Figure 1.] When asked about their industry specifically, there is little difference reported regarding own-industry vs. the national economy.

Figure 1. CEO beliefs about business and economic conditions today compared to six months ago

Looking ahead to the rest of 2016, optimism ticks up while pessimism remains unchanged. Forty-eight percent believe business and economic conditions will improve; nineteen percent anticipate conditions will worsen, statistically no different from the year prior [Figure 2.]

Fifty-one percent of CEOs polled anticipate revenue growth and 72 percent project increases in profits for their companies, suggesting cost reductions for many businesses. Additionally, business owners expect increased demand and rising prices to enhance profit growth. Fifty-three percent plan to invest in fixed assets to meet increased demand, reduce costs, and increase productivity. Funds for these investments will largely (63%) come from internally generated funds; only 29 percent plan to borrow from a financial institution.

Figure 2. CEO beliefs about business conditions and economy over rest of 2016

CEO rankings of major areas of concentration for their company for the rest of 2016 are shown in Figure 3. Focusing within appears to dominate as 66 percent plan to expand within existing markets and 57 percent look to grow existing product lines. Only 11 percent and 12 percent anticipate construction of new locations or acquisition of new businesses, respectively. To meet these areas of growth, 36 percent plan to increase their workforce while 58 percent expect no change.

Figure 3. Areas of concentration for 2016 (%)

Figure 4 shows the 2016 CEO Index values where 100 indicates a balance of positive and negative beliefs. Overall, 21 percent more business owners believe that business conditions are positive than negative. There is a significant difference between sentiment about the past six months (current) and the rest of 2016 (future.) The future CEO index is nearly 13 points higher than the current index, suggesting growing optimism about the future months. The top three concerns for business owners are health care costs, government regulation, and taxes.

Figure 4. CEO Indexes

Regional and Industry analysis

Figure 5 illustrates the CEO Index for the Commonwealth as a whole (total) and by region. All regions are above the breakeven value (100), although Southwest Virginia just barely so. Some regions are above the state level (Shenandoah Valley and Northern Virginia), but the distribution is fairly compact.

Figure 5. CEO Index by Region

Figure 6 shows the CEO Index by industry. Several industries are below the breakeven level (black line.) Optimism is strongest within service, food & beverage, and engineering & construction, particularly with respect to the rest of 2016. Business owners in manufacturing and retail express concern, especially about the past six months.

It should be noted that the sample size in each region and in each industry is small, and caution should be taken when drawing any conclusions.

Figure 6. CEO Index by Industry

Business climate

Virginia business leaders report a general lack of confidence in the ability of government at all levels to improve business climate. However, 88 percent report that if they had to do it all again, they would choose Virginia over another state for their business.

State

Business leaders do not have a positive opinion of state government with respect to the Virginia economy and business climate. Sixty-three percent believe Richmond is doing a fair or poor job of creating a business climate for companies like theirs to succeed. Additionally, 64 percent are not confident that the state government will improve that climate in the next year. The top three items business owners would like the Governor and the General Assembly to address are business development incentives, income tax reform, and infrastructure development.

Federal

Less confidence exists in the federal government's ability to improve business climate. Figure 7 shows CEO confidence for both state and federal regulators to improve climate. Almost 90 percent of business leaders report a lack of confidence in the federal government's ability to improve the business climate for businesses like theirs in the coming year. Ninety-two percent say that Washington is doing only a fair or poor job in that arena.

Figure 7. CEO confidence in government to improve business climate (%)

Virginia CEOs strongly support passing a balanced budget amendment and reducing the corporate income tax rate (77% and 78%, respectively.) The majority also support repealing the Affordable Care Act (67%) and increasing federal spending on infrastructure (60%). These opinions are shown in Figure 8.

Figure 8. CEO opinion on various national proposals (%)

The 2013 Sequestration impacted the Virginia economy more than other states due, in part, to the heavy reliance on government contracts and employment in Northern Virginia and Tidewater, two of the most populous regions of the state. Thirty-one percent of CEOs reported some negative impact from sequestration while 68 percent said they experienced very little to no impact. Looking ahead, 70 percent anticipate little to no impact from sequestration on their business, while 29 percent anticipate some negative impact through the rest of 2016.

Local

Only 21 percent of CEOs believe that the general business climate in their immediate vicinity is improving; 18 percent report it is worsening. Business leaders anticipate a positive impact on the economic vitality of their geographic region primarily from the technology, education, and medical industries.

Virginia business leaders rated their local area highly as a place where customers want to live, but they were critical of local government support for business and transportation infrastructure. Figure 9 shows these area ratings and more.

Figure 9. Local area ratings (%)

Workforce

Fifty-nine percent of CEOs rank their local area workforce as good or excellent (Figure 9) but 58 percent report that there is not an ample supply of workers appropriately trained for their employment.

Figure 10 shows CEO ratings of recent job applicant skills. Applicants are deficient in all skills (majority rated fair or poor), particularly in writing and initiative. The most highly rated is technical skills, although only 39 percent of business leaders rated applicants as excellent or good for this attribute. This suggests a structural problem with Virginia's workforce as skills are widely lacking for job openings.

Figure 10. CEO rating of recent applicant skills

Impact of the ACA

Virginia business leaders report numerous changes in business practices made due to the Affordable Care Act. Figure 11 illustrates these modifications. The most common change is the reduction of benefits to workers to cut costs (37%). In part to avoid the employer mandate, firms are hiring more part-time employees and reducing the number of hours current employees work.

Figure 11. Changes made due to the ACA

Methodology

The Business Leaders Poll targeted Chief Executive Officers and owners of privately-owned companies in Virginia with annual sales volumes between $5 million and $500 million. The Institute for Policy and Opinion Research (IPOR) obtained a list of executives from Infogroup, a data and marketing firm in Papillion, NE. The list contained contact information for 5,929 companies.

In November, 2015, the questionnaire was mailed to each person on the list. Additional contacts were made by email, postcard, and regular mail. Each person was contacted at least three times with the final contact in March, 2016. We received 310 responses. Because we contacted the entire list rather than a sample, there is no corresponding margin of error due to sampling.

IPOR subscribes to the American Association for Public Opinion Research (AAPOR) Code of Professional Ethics and Practices and is a charter member of the AAPOR Transparency Initiative.

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Contact Name: Dr. Alice Louise Kassens, Senior Analyst, IPOR
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: kassens@roanoke.edu