State's small firms see higher revenue
But survey says many worry costs will hurt growth
Massachusetts small business owners expect revenue to increase and are more confident about the economy than they were earlier this year, yet many still worry the cost of doing business here will derail their growth, according to the results of Citizens Bank's latest survey on the attitudes of small business owners.
Since the last survey in June, the percentage of businesses optimistic about the national economy climbed 13 percentage points to 36 percent . Fifty-one percent said their annual revenue had increased over the past year, compared with 42 percent who reported better revenue in June. But 84 percent said the cost of healthcare for their employees is their greatest concern, while nearly half -- 42 percent -- said the cost of fuel is hurting their ability to grow.
Taxes are also among the greatest concerns of local business owners, with 59 percent saying local property taxes hurt their businesses and 60 percent said the same about state income taxes.
"What's interesting is this increased optimism, but the challenges that they're pointing out are very much Massachusetts-oriented," said Hal R. Tovin , Citizens' executive vice president in charge of retail and small business banking.
The survey only measures attitudes of Massachusetts business owners. But since many states have lower costs of living, small firms outside of Massachusetts may not share the concerns, Tovin said.
Citizens' October survey is its third since the bank started its periodic "small business pulse" survey last year. It measures the attitudes of 200 entrepreneurs from around the state whose companies pulled in between $100,000 and $10 million in revenues last year.
Tovin said the bank started the surveys to help it better understand the needs of its small business customers, which represent a significant portion of its business and account for much of the state's economic growth.
Some of the survey's findings, he said, are used by Citizens to design services it can market to customers.
For example, the bank is considering introducing a health savings account for employers to help them mitigate the cost of health insurance for employees. Details of that plan have yet to be finalized, he said.
Anthony Selos , managing partner at SurfMerchants LLC , a six-year-old Boston software company, agreed with many of the survey's findings.
SurfMerchants has 26 employees and expects its $3 million in annual revenue to increase in 2007 . Selos himself thinks inflation is under control, and fuel prices have spiked, making for a stable national economic picture.
But the cost of living in Massachusetts is so high that the company lets employees come into the office as few as 10 days per month and telecommute the rest of the time, a schedule that helps them save on gas and possibly car insurance.
SurfMerchants also pays the entire cost of healthcare, dental, and life insurance for its employees --a nod, Selos says, to the other high living costs workers have to pay on their own. But ultimately, he said, the company will have to find another way to do business as those costs continue to rise.
"That's one of our concerns," he said. "We've looked at some self-insurance models, but the cost of self-managing in time spent doesn't outweigh the cost of Blue Cross and Blue Shield right now," he said.
Keith Reed can be reached at reed@globe.com. 
