Nevada business owners and executives expressed confidence their company revenue will grow in 2017, and they expect to hire and train additional employees.
That’s the result of a survey of 200 business leaders conducted statewide in January by WestGroup Research and funded by Bank of Nevada and First Independent Bank, divisions of Western Alliance Bank.
Some 87 percent of Nevada business leaders are confident about the future. Thirty nine percent are “very confident” their revenue will increase over the next 12 months, while 48 percent said they were “somewhat confident” that their revenue will increase, according to the survey.
With more confidence, many business leaders plan to increase investment in the coming year. Some 56 percent plan to hire additional employees, and 52 percent said they plan to provide additional training. Another 52 percent plan to increase marketing and promotion.
That boost in confidence follows the election of President Donald Trump. The majority of business leaders, 62 percent, said they believe the recent presidential election will have a positive impact on their business sector. Only 18 percent said his election will have a negative effect.
That confidence may be a byproduct of what’s happened in the stock market since the election in which the Dow has hit all-time highs, said John Guedry, CEO of Bank of Nevada. There’s anticipation of tax reform and reductions of regulations that many businesses view as onerous, costly and ineffective, he said.
“That’s probably speculative a bit of where the market will head in the next year or so and if and when those changes occur at the federal level,” Guedry said. “That (increased confidence) is probably true after most elections. You have a new leader in there and new policies in place, and if the policies appear at least remotely business friendly, then you can find a fairly positive response from business owners.”
Business owners, by their nature as entrepreneurs, tend to be more positive in their outlook, Guedry said. In addition, Nevada recovered much later than the rest of the country, and there’s been continued improvement in the state, and that probably has boosted that optimism.
“It’s in their makeup and in their DNA, so they’re always optimistic about where things are heading, unless the signs are clearly obvious they’re going in the wrong direction,” Guedry said. “Just the prospect of changes at the federal level that will provide some reprieve to business owners that feel repressed by all of the regulations and maybe seeing some solution, although not immediate, to the rising cost of health care impacting their bottom line.”
Guedry said Bank of Nevada has seen a pickup of loan activity. This marks the third consecutive quarter there’s been an increase in loan applications. Other banks are reporting similar findings, he said.
With so many business executives saying they will increase their hiring, that shows Nevada is in a growth mode that hasn’t been seen in the last seven to eight years, Guedry said.
“I think it’s one of those pent-up demand things,” Guedry said. “We will see whether it’s a massive amount of pent-up demand, and we see significant growth, or we’re going to take this a little slow. The last time around we grew too fast and the economy tanked, and we don’t want to find ourselves in that position again. Time will tell.”
Nevada business leaders said the biggest challenges facing the business community include the quality and availability of the state’s workforce, the public education system and increasing health care costs.
Some 51 percent cited the quality and availability of the workforce as one of the top challenges for Nevada businesses. Half of respondents cited concerns about the education system, followed by health care costs at 37 percent, business taxes at 24 percent and business regulations at 22 percent.
“The business community is sending a clear and unified message about the need for improvements to our public K-12 education system,” Guedry said. “Our ability to diversify Nevada’s economy is absolutely tied to the improvements we make in educational outcomes, student proficiencies, higher graduation rates and expansion of workforce training.”
The issue of the K-12 education system and having a trained workforce is something talked about often in the business community at various chambers of commerce and economic development groups, Guedry said. It’s a challenge to find qualified people to fill existing jobs, and that’s why the business community is working closely with the Clark County School District on its ongoing reorganization, he said.
More than half of Nevada business leaders said increasing the pool of STEM (science, technology, engineering and math) graduates would be among the actions having the most positive impact on Nevada.
Only 30 percent, however, said it was important to increase higher education funding. Guedry said that finding surprised him, but it may be that the current economy doesn’t require as many higher education positions. That will change as the economy continues to diversify, he said.
“We’re going to see larger demand not just on vocational training, which is one really key component we’re falling short in right now, but for higher education training for some of medical professions, technology and renewable energy. Now you’re talking research jobs with more advanced education. When we do this survey again in another three to five years, you will see a shift toward more training for a workforce that’s got a higher-education background.”
Asked to define the benefits of doing business in Nevada, 63 percent of participants cited quality of life. That was followed by tax structure at 51 percent and climate and weather at 43 percent.
When the survey was narrowed for Southern Nevada business leaders, 56 percent cited tax structure as the No. 1 benefit of doing business in the state. Weather ranked second at 54 percent, and 39 percent cited the low cost of doing business. Quality of life placed fourth at 38 percent.
The survey asked business leaders to prioritize the actions local government could take to enhance the state’s business climate. Educational issues and workforce training were most often cited. Some 59 percent said improving K-12 education would benefit the business climate for their company. Other responses included community college training/workforce development (41 percent), streamlining the business permit process (33 percent), approving more affordable housing developments (27 percent) and increasing efforts to ease traffic and road congestion (26 percent), according to the survey.
Business leaders said in the survey the state government can also take action to improve the business climate for their companies. The largest group (57 percent) cited pro-business tax policies, followed by an increase in K-12 funding (38 percent), further streamlining of regulatory and permit approvals (33 percent), increased higher education funding (30 percent), investment in traffic relief/transportation improvements (25 percent), reduced public pension costs (20 percent), creating more affordable housing (17 percent), investment in broadband infrastructure (15 percent), targeted industry incentives (12 percent), enhanced access to capital (10 percent) and enhanced research and development capacity (9 percent), according to the survey.
When such surveys are done, Guedry said, there’s always concern about taxes, and he said he’s surprised that fewer businesses were concerned about that, especially when state taxes were hiked in 2015 to fund education. That may mean there are greater concerns in other areas, he said.
Elsewhere in the survey, 39 percent of business leaders said they plan to expand information technology; 19 percent plan to expand product development; 17 percent will improve data analytics; and 13 percent will implement automation.