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Now's the right time for the small plan market

Small businesses continue to show growth in income, jobs and number of employer firms.1 With the market rapidly changing, it’s time to take a fresh look.

In talking to business owners, conducting research and analyzing trends, we’ve uncovered a better sense for what’s really happening. Small business owners tell us they’re ready to hire and it doesn’t appear to be slowing down anytime soon. That makes this market ripe for benefits right now with more opportunities than ever before. 
 

Use our data-driven perspectives to get a handle on this evolving market. And find out how it can influence your business.

Business
environment
Competition
for talent
Right time for
your practice
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Business
environment
Competition
for talent
Right time for
your practice
+
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Business
environment
Competition
for talent
Right time for
your practice
+
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Download the full e-book
Business
environment
Competition
for talent
Right time for
your practice
+
=
small-to-medium-sized-business-smb-icon.jpg
Small- to medium-sized business (SMB)
500 or fewer employees
Small- to
medium-sized
business (SMB)
500 or fewer employees

The future looks bright for SMB owners

Most business owners say they’re feeling good about their business, and for good reason. They rate the health of their business high and see their overall economic outlook steadily and significantly improving. 
 

One of the biggest drivers for owners’ optimism may be their financials. As you might have guessed, those who work with a financial professional have higher optimism than those who don’t.2
 

Three quarters of business owners report they have surplus capital. Yet, more than half say they don’t plan to spend it. Instead, they tell us they’re saving for future growth or development.2

small-market-future-bright-infographic.jpgMore than 4 of 5 rate their overall business as healthy or very healthy infographicMillenials rate their business health even higher infographicoptimism is at a 6-year high among owners infographic

But how long will it last?

Our chief global economist, Bob Baur, sums up the market like this — the world economy continues its remarkable and robust recovery from the near-recession in late 2015. The strong momentum should continue through 2018 and into 2019.
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Close to 7 in 10 say business financials improved over the last year.2
seven-in-ten-people-infographic.jpg
And 70% of those expect the improvement to continue.2

Small businesses growing and hiring

With the small business market the strongest it’s been in 20 years, most businesses are looking to hire. In fact, SMBs create nearly two out of three net new private sector jobs in the U.S.3 It’s not just the number of employees within the businesses growing, it’s the entire market.

When businesses expand, it creates a demand for employees. Employers need to find and hire good talent, but most small businesses are having challenges in the face of all this growth. And the longer this market stays strong, the tighter the employment market could get.

The U.S. employment rate has hovered right around 4%, a 17-year low — making it a job seekers’ market.4 And it’s starting to take a toll. More than one-third have seen a negative impact on their business due to extended job vacancies, including loss in productivity, lower morale, lower quality of work and loss of revenue.5

With the talent market tight, small business employers appear willing to pay for what they want.

small-market-business-employers-willing-to-pay-for-what-they-want-stats-infographic.jpg57% plan to increase salaries on initial job offers for new employees infographic80% say they'll increase compensation for existing employees infographicThe median wage for workers in the U.S. is on the rise, up about 3% from the previous year infographic

But with a shallow talent pool and concerns about hiring, employers know wages might not be enough.

About one-third of small employers say they plan to increase pay and more than half plan to add new benefits over the next year, which is great because better benefits can help attract and retain good workers.6,7
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73% of employees
say a retirement savings plan is a critical factor in deciding whether to stay or change jobs. 8
73%-of-employees-critical-factor-infographic.jpg
66% of workers
say they’d even pay higher costs for more generous retirement benefits.9
66%-of-workers-pay-higher-costs-for-more-generous-retirement-benefits-infographic.jpg
More than 3 in 5
say employee benefits help with retention.11
2-of-5-want-benefits-infographic.jpg
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Put it to work for your practice

With the growth in the number of small businesses, it’s no surprise that there’s also projected growth in the small retirement plan market. A quick look at the numbers shows the vast majority of plan sales opportunities will be in the small market segment (under $5 million).

Employers are no longer struggling to find capital, and with the tight job market they’re looking for ways to recruit and retain top talent. They just might not know where to start. Data shows employers are waiting for advisors to reach out to provide direction and guidance.2,11

put-it-to-work-for-your-practice-stats-callout.jpg
More are using a financial professional
put-it-to-work-for-your-practice-stats-callout.jpg
Existing financial professional (FP) isn't knowledgeable
put-it-to-work-for-your-practice-stats-callout.jpg
Current FP hasn't even contacted them
15 percentage-point
increase in 2 years.11
Up to 12% in 2019
from 8% in 2015.11
13% in 2019 compared
to 6% in 2015.11
put-it-to-work-for-your-practice-stats-callout.jpg
More are using a financial professional
15 percentage-point
increase in 2 years.11
put-it-to-work-for-your-practice-stats-callout.jpg
Existing financial professional (FP) isn't knowledgeable
Up to 12% in 2019
from 8% in 2015.11
put-it-to-work-for-your-practice-stats-callout.jpg
Current FP hasn't even contacted them
13% in 2019 compared
to 6% in 2015.11
owners-value-expertise-most-stats-callout-infographic.jpgowners-value-expertise-most-stats-callout-infographic.jpg
Here’s the thing, likely due to the business market, these employers have their priorities in the right place. We saw a decline in those who tell us they’re too busy with day-to-day challenges (30% in 2017 compared to 40% in 2015).11 This can free them up to focus on benefits.
And more employers are focused on adding benefits to compete for talent. Driven by retention and recruiting pressures, the need for an employer-sponsored plan is shifting from a “want to” to a “need to.” In the past you may have been searching for that paternalistic small business owner looking to “do the right thing,” but it might not be as important any more. It’s more about how you can help them build their business by attracting and retaining good workers.

The combination of employer readiness and market growth is your chance to be in the right place at the right time — this market, right now.12, 13
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More than 3 in 5
say employee benefits help with retention.11
nearly-3-in-5-say-employee-benefits-help-with-retention-infographic.jpg
And nearly half of employers
now say that’s their top goal for offering benefits.11
half-of-employers-now-say-their-top-goal-for-offering-benefits-infographic.jpg
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Get all the details

Startup plans for less than 100 employees
Simply Retirement by Principal®
Startup plans - $10 million in AUM
Principal® EASE
$1 million - $10 million
Principal® IMPACT
>

Get all the details

Startup plans for less than 100 employees
Simply Retirement by Principal®
$1 million - $10 million
Principal® IMPACT
1 Small Business Quarterly Bulletin, U.S. Small Business Administration Office of Advocacy, March 2019.
2 Principal Financial Well-Being Index: Business Owners, September 2017.
3 Frequently Asked Questions About Small Business, U.S. Small Business Administration Office of Advocacy, August 2018.
4 Bureau of Labor Statistics, May 3, 2019.
5 Survey Reveals 5 Small Business Hiring Trends for 2018, CareerBuilder, Jan. 16, 2018.
6 Annual Jobs Forecast, CareerBuilder, March 2019.
7 The State of Small Business Employee Benefits in 2019, Clutch, April 2019.
8 The State of Employee Benefits, EBRI, April 10, 2018.
9 2017/2018 Global Benefits Attitudes Survey, Willis Towers Watson, March 2018.
10 Employees Want Plan Features That Accelerate Retirement Savings, American Century Investments, 2017.
11 Principal Business Owner Research, March 2019.
12 Retirement Markets, Retirement Insights, February 2019.
13 U.S. Retirement Markets 2017, Cerulli Associates, December 2018.