Reactions to the Fiscal Cliff From Act-On Customers
There’s “cliff” talk everywhere these days and all of us have been drawn into it at some level by the media. There are many opinions, many proposals, and many big wigs weighing in. Just yesterday, GE’s CEO Jeff Immelt stated that GE’s earnings were down because of the uncertainty posed by the fiscal cliff and I expect many other CEOs to voice similar concerns. So, even if you weren’t concerned about the impact of the fiscal cliff on your business till a few weeks ago, you probably are now.
That’s exactly how we felt here at Act-On. We decided to do a short informal poll of our customers, to try to understand how the current uncertainty in future tax rates was affecting their businesses and their planning for 2013. Our customers are primarily small and mid-sized businesses across many vertical industries. They are early adopters of technology and big believers in automation to improve productivity and business efficiency. Fifty companies responded to our survey (statistically significant enough for our purposes1), with results we found very interesting and in some cases surprising.
Here are our conclusions:
- Impending tax increases and the fiscal cliff have not affected business or investment plans for 2013. Survey respondents expect to continue to invest in their businesses, keep their marketing budgets intact and not reduce staff
- Respondents do not think that a tax increase is going to reduce their customers’ spending
- Respondents’ reactions were mixed about the effect of the fiscal cliff on future growth
The results of this survey clearly show that respondents are not very concerned about the negative effects of the impending tax increases or of the fiscal cliff. Several factors could explain the difference in outlook towards the fiscal cliff and tax increases from these companies from others we read about in the news. Some of them include the following:
- Most of our survey respondents are SMBs who operate in a more localized environment and are less impacted by cuts in areas such as government spending
- Many are top performers who have adopted technology and automated their systems to be more efficient. A recent study done by Forrester and Act-On Software saw large differences between SMBs who are top performers (who beat revenue plans in the last year) and bottom performers (who did not meet revenue plans)
- The fiscal cliff could be a convenient excuse to try to explain poor performance due to other reasons
Do give us your comments below on what you think.
More details on the results are provided below.
1) Business execution will continue as planned
The most positive news is that the SMBs we talked to are not fazed by the cliff. They are planning business as usual, continuing to invest, and continuing to maintain employment or hire more depending on their plans.
2) Tax increase is not expected to affect customer spending
Although there is concern about the fiscal cliff, a large majority do not think the impending tax increase will negatively impact their customers’ spending. Clearly these businesses feel that a tax increase to pre-Bush era level is not going to break the bank
3) Concern that the uncertainty of the fiscal cliff will impede growth
When asked the question of whether the uncertainty of the fiscal cliff will impede their company’s growth we saw a close split between those who said yes and those who said no.
Even though the prospect of tax increases hasn’t spooked them when it comes to their business planning and investment, all this talk of the cliff and perhaps an inability for Congress to agree on anything definitely has them worried about business growth.
 Given our sample size and the proportion of the total customer population it represents, we estimate at a 95% confidence level that our confidence interval (margin of error) is within 6%