Most Small Businesses Expect an Economic Recovery in 2010 According to Administaff Survey

HOUSTON--(BUSINESS WIRE)--More than 58 percent of small business owners expect an economic turnaround in 2010, while 14 percent anticipate a rebound by the end of 2009 and 14 percent think the recovery will be in 2011 or later, according to the most recent Business Confidence Survey released today by Administaff (NYSE:ASF), a leading provider of human resource services for small and medium-sized businesses.

“Small and medium-sized businesses are battling through the challenges of the recession and appear to be preparing for a recovery in 2010.”

The economy was listed by 83 percent of business owners as their biggest concern for 2009, followed by 53 percent citing government healthcare reform, 44 percent listing controlling operating costs and 33 percent specifying rising healthcare costs. However, for 2010 and later, concern about the overall state of the economy fell to fourth place, at 36 percent, when the largest number of survey participants expressed a 55 percent tie vote for being “very concerned” about both potential tax increases and the effect of government expansion on business, and 50 percent listed the Federal deficit.

When respondents were asked about their pipeline for new business for the balance of 2009, 41 percent responded that they expect a sales increase, 35 percent predict it will stay the same, while only 15 percent anticipate decreasing sales and 9 percent weighed in as unsure.

In addition, 60 percent of owners and managers of small and medium-sized businesses said that they are either meeting or exceeding their 2009 performance plans, with the remaining 40 percent reporting that they are doing worse than expected.

“Throughout America’s history, the entrepreneurial spirit has overcome obstacles and capitalized on opportunities, and our current economic setting is no exception,” said Paul J. Sarvadi, Administaff's chairman and chief executive officer. “Small and medium-sized businesses are battling through the challenges of the recession and appear to be preparing for a recovery in 2010.”

Since increased employment is one of the final signs of an economic recovery, respondents said that they are continuing to use cautious approaches in managing current staffing and compensation plans. In the survey conducted late last month, 60 percent of participants said they are maintaining current staffing levels, while 23 percent are adding new positions, up from the 18 percent in the survey conducted three months ago. Layoffs were named by 16 percent as a current management strategy versus 19 percent in May.

The survey also revealed that 68 percent of participants expect to maintain employee compensation at current levels for the remainder of this year; 10 percent plan increases; 6 percent expect decreases, down from 12 percent previously; and 16 percent were unsure.

When polled about their current profit-generating activities, 72 percent of participants listed selling new accounts as the leading strategy, an increase from 66 percent in May. This was followed closely by 68 percent naming increased service to clients. Negotiating with vendors garnered 31 percent, and survey respondents listed acquisitions fourth at 17 percent.

Of the 57 percent citing current plans to cut operating expenses from current levels in the remainder of 2009, 70 percent said they would do so by limiting travel and/or entertainment, 60 percent named negotiating with vendors, and more than 53 percent each specified postponing or cutting capital investments and/or canceling or delaying projects.

Administaff also announced compensation data from its base of more than 5,900 small and medium-sized businesses. Compared to the 2008 second quarter data, average compensation is up 2.1 percent, bonuses are up 2.0 percent and commissions increased by 0.2 percent in 2009. Overtime pay is running a low 7.1 percent of regular pay, continuing to signal the lack of demand for additional employees at this stage of the economic cycle.

About the Business Confidence Survey

Respondents to the Administaff Business Confidence Survey are among the small and medium-sized companies Administaff serves throughout the country. The questions were designed to measure the pulse of the small-business community and gauge the activities and expectations of business owners in 2009.

Administaff conducted the survey July 21-23, 2009, of chief executive officers, chief financial officers and other executives in a variety of industries at its client companies throughout the United States. The overall sampling error of the national survey is +/- 5 percent at the 95 percent confidence level.

Administaff is the nation’s leading professional employer organization (PEO), serving as a full-service human resources department that provides small and medium-sized businesses with administrative relief, big-company benefits, reduced liabilities and a systematic way to improve productivity. The company operates 50 sales offices in 23 major markets. For additional information, visit Administaff's Web site at http://www.administaff.com.

The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, Administaff, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. We base the forward-looking statements on our current expectations, estimates and projections. These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) changes in general economic conditions; (ii) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, financial solvency of workers’ compensation carriers and other insurers, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims, changes in the costs of expanding into new markets, and failure to manage growth of our operations; (v) the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll and benefits costs; (viii) our liability for disclosure of sensitive or private information; and (ix) an adverse final judgment or settlement of claims against Administaff. These factors are discussed in further detail in Administaff’s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combination of such factors could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.