Mechanics Bank has gone social. Join the conversation!

Print this page small font normal font large font


Northern California Business Owners and Managers Optimistic and Planning to Hire, Despite Adversity

Richmond, CA, May 23, 2005 –They’re expecting higher taxes, more regulation, and a tougher time finding qualified employees. But do Northern California business owners and managers let little things like that get them down? Not on your life.

The first annual Mechanics Bank Northern California Business Optimism Survey and Index, completed in February and March, paints a picture of Northern California business owners and managers as decidedly more optimistic than their counterparts responding to recent national and statewide polls. Nearly four out of five of the randomly selected 1,214 respondents expect 2005 profits and revenue to increase and nearly nine out of ten expect their businesses to continue to improve in 2006. That compares with just 47% of respondents expecting improvement in The Conference Board’s first quarter 2005 nationwide CEO Confidence Survey. Best of all, businesses appear ready to put their money where their mouths are, with over 54% planning to hire new staff, and only 8% thinking it likely they’ll reduce staff. Businesses even are showing a propensity to add, rather than reduce, employee health benefits.

“Faced with some of the highest costs and most challenging state and local government regulations, doing business in Northern California requires a high degree of optimism,” said Steve Buster, president and chief executive officer of Mechanics Bank, a 100-year-old Richmond, California-based community bank with over 6,800 business customers throughout the Bay Area and Sacramento. “Our local businesses have that in spades--yet they also are highly realistic about the challenges they face. Their perseverance in the face of adversity is simply awesome.”

Despite such boisterous optimism, a significant margin of those polled said that doing business in Northern California is harder than in other parts of the country and felt that many of the external forces impacting their businesses – from the cost of employee benefits, taxes and regulation to transportation issues – will only get worse during the next 12 months. They also think it will be harder to find qualified employees.

Mechanics Bank survey, which kicks off an annual Business Optimism Index, gave business owners the chance to sound off. Asked what they would tell the governor to change, respondents confirmed that in addition to workers compensation, taxes, regulations and the cost of health insurance are their biggest headaches. “I would say that unless the tax burden and regulatory burden is lifted California will fall into the ocean long before the San Andreas pushes us in,” said one respondent. “We need a better healthcare system so that we can afford to give more health benefits to employees and also workman's compensation fees need to be affordable,” said another.

Despite those challenges, business owners seem to love their independence. Asked what they found most satisfying, typical comments included: “Everything about my company has been great this year and my profits have been skyrocketing. I love being a self employed businesswoman and being able to see my business grow before my own eyes.” Another lauded "the pride of being self-employed and not being on government welfare.” And still another said, “It’s mine. It’s my business and it’s what I make of it and I get to do what I love doing and make money at it.”

The core questions forming Mechanics Bank’s Business Optimism Index—all of which will continue to be asked in future surveys—were designed to illuminate business owners’ intentions regarding their own businesses and their expectations of some of the external forces that create the environment in which they operate. One set of questions asked how likely they were over the course of the next year to hire, reduce or replace staff with temporary contractors; invest in new equipment or develop new product or service lines; have increased sales/revenue or profits; expand to new domestic or international markets; and borrow to finance expansion.

Responses to most of these questions yielded general agreement across such dimensions as county and industry. But technology companies were most likely to develop new products or services in the next 12 months, followed by manufacturing companies and wholesalers. Technology companies, manufacturing companies and wholesalers also were more likely to develop export markets than were any other types of businesses.

Another set of Index questions measured owners’ expectations of the governmental, regulatory and institutional environments in which they operate—and predictably, these drew the least optimistic responses of the overall study. Across the board, business owners and managers by large margins expected things to get worse over the course of the coming year, with the cost of employee benefits (78%), transportation issues (71%) and Workers Compensation (66%) at the top of the list. Sixty percent also anticipate a worsening local regulatory environment. These expectations held consistently by geography, industry and size of the business.

“The overall picture created by these responses is one of little faith that government at either the local or the state level will improve business conditions or reduce the constraints under which business people labor,” said Buster. “These findings make it abundantly clear that the optimism that business people feel is firmly grounded in their own business skills and talents and in their own abilities to succeed in a difficult environment.”

Almost half (48.8%) the businesses surveyed provide health benefits, with the lowest percentage in the retail industry and the highest in the transportation, communications and utilities industries. Interestingly, only 53% of healthcare businesses surveyed provided healthcare benefits for employees. Generally, businesses that have been in business longer are more likely to offer healthcare benefits than are newer businesses. But surprisingly, very few (9%) respondents indicated they have changed their benefits in the past year—despite a nationwide trend to do so—and the majority of those had added rather than decreased benefits.

About Mechanics Bank:

Mechanics Bank, headquartered in Richmond, California, celebrates a century of innovative community banking this year. An independent community bank with almost $2.5 billion in assets, it has become one of the largest banks headquartered in the San Francisco Bay Area.

Mechanics Bank’s Northern California Business Optimism Index is based on a telephone survey of 1,214 conducted in February and March, 2005, of randomly selected owners and senior managers of businesses with annual revenues ranging from $50,000 to $20,000,000. Survey results are accurate to within ± 2.8 percent at the 95% confidence level. The Optimism Index defines 17 business indicators that represent Optimism in business. Periodic tracking of those indicators will allow Mechanics Bank to analyze and report upon future increases and decreases in Optimism over time. The survey was conducted for Mechanics Bank by Seldin Research, an independent market research company located in Half Moon Bay.

Press contacts:
Ms. Hatti Hamlin

Mr. David Louis