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Studies project stronger revenue and spending

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The climate for U.S. small business is positive, with leading indicators such as projected revenue, projected spending and optimism all pointing up, according to a study of small businesses conducted by City Business Journals Network.

The study, "The Pulse of American Business 2005," was based on interviews with more than 1,600 small-business owners, CEOs and presidents at companies with fewer than 500 employees.

City Business Journals Network partnered with Russell Marketing Research and ReedHaldyMcIntosh Associates on the study.

In one key finding, small-businesses' non-payroll spending is expected to reach $2.6 trillion this year, up 8.0% over last year.

A separate study, released by Visa USA, projects non-payroll spending by small businesses will reach $4.7 trillion this year. For its study, Visa defined small businesses as those with less than $25 million in annual revenue.

According to the City Business Journals study, the biggest share of small-business spending will go toward operating expenses (43.6%), followed by financial/investments (22.8%), professional services (8.4%), employee benefits (8.2%), technology (4.5%), marketing and advertising (4.2%), telecommunications (3.0%), retail (2.0%), delivery services (1.9%) and business travel (1.4%).

"Small businesses are spending more on marketing and advertising," said Keith Edwards, director of sales development at City Business Journals.

Small-business spending on marketing and advertising is expected to reach $108 billion this year, up 8.0% from last year.

For companies with between 100 and 499 employees, the average spending on advertising and PR will be $114,600 this year; direct mail will be $52,410; advertising and promotional fees will be $19,660, and other marketing activities will be $30,300, the study found.

The study also determined that 70% of respondents expect their revenue to increase this year, 14% said revenue is expected to stay the same and 16% projected a revenue decrease.

Optimism among small-business executives is also up this year. When asked "How do you think your company's prospects will change over the next 12 months?" 35% of respondents said they would be "a lot better," compared with 26% last year; 52% said "a little better," compared with 60% last year; 11% said "stay the same," compared with 12% last year; and 2% said "get worse," the same as last year.

The number of small businesses in the U.S. is also growing, the study found. This year, there are approximately 7.5 million businesses in the U.S. with fewer than 500 employees, up from 7.3 million in 2004. Of these, 4 million have between one and four employees, 2.4 million have between five and 19 employees, 872,000 have between 20 and 99 employees and 151,000 have between 100 and 499 employees. 

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