U.S. Small-Business Owners' Optimism Continues Slow Rise
Economy

U.S. Small-Business Owners' Optimism Continues Slow Rise

Concerns over marketing and competition underscore business challenges

PRINCETON, NJ -- U.S. small-business owners' optimism about their businesses continues to rise slowly, according to the Wells Fargo/Gallup Small Business Index, although it remains well below where it was prior to the 2008 recession.

Wells Fargo/Gallup Small Business Index

Optimism among small-business owners has reached its highest level in six years, spanning a period of ups and downs in the stock market even as the economy has struggled to recover from the 2008-2009 recession. In the quarterly survey of small-business owners, conducted July 7-11, the overall Small Business Index score registered +49 in July, similar to +47 in April, but up from +45 in January 2014.

The current situation is a significant factor in small-business owners' increased optimism. The Present Situation component of the index is now +18, higher than at any point since Quarter 3, 2008, although still trailing pre-recession levels.

Wells Fargo/Gallup Small Business Index, Index Components trend

Several specific factors contributed to this modest improvement in small-business optimism:

  • Small-business owners are more positive about their last 12 months of revenues, with 43% reporting that their company's revenues increased in the last 12 months, compared with 36% in Quarter 2, 2014.
  • The highest percentage since Quarter 1, 2008 -- 55% -- report a very or somewhat good cash flow over the past 12 months. This is up from 50% in Quarter 2, 2014.
  • Ease of obtaining credit in the past 12 months is also up slightly -- with 32% of small-business owners saying it has been very or somewhat easy to obtain credit in the past 12 months, and 38% expecting that credit will be very or somewhat easy to obtain in the next 12 months.

Small-Business Owners Still Say Attracting Customers Is Top Challenge

As optimism gradually improves, small-business owners report that attracting customers and finding business (13%) continues to be their "most important challenge." Tied for second place on business owners' list are difficulties imposed by government regulations, the financial stability of their business, and the economy (11% each).

Small-business owners in the July survey were asked specifically about the challenges they face in attracting and retaining customers. Fourteen percent mention traditional concerns about marketing, advertising, and getting word of their business out to potential customers. Almost as many (13%) mention their competition, including larger companies and corporations, and the Internet. Ten percent say their greatest challenge in attracting customers is having the money to invest in running and improving their business, and another 10% mention difficulty in making certain products available, or in making product improvements. Other responses include the economic environment in which they operate their business, and staffing issues.

What’s the single biggest challenge you face when it comes to attracting and retaining customers, and growing sales? July 2014 results

About the Wells Fargo/Gallup Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small-business owners on current and future perceptions of their business' financial situation. The index reflects two dimensions of small-business finances: 1) owners' ratings of their business' current financial situation, and 2) owners' expectations for how their businesses will perform over the next 12 months.

The overall Small Business Index is computed using a formula that scores and sums the answers to 12 questions -- six about the present situation and six about the future. An index score of 0 indicates that small-business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies' situation. The overall index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range. The highest index reading was +114 in the fourth quarter of 2006, and the lowest reading was -28 in the third quarter of 2010.

For more information about Wells Fargo Works for Small Business, visit: WellsFargoWorks.com.

Survey Methods

Results for the total data set are based on telephone interviews conducted July 7-11, 2014, with a random sample of 603 small-business owners, living in all 50 U.S. states and the District of Columbia.

For results based on the total sample of small-business owners, the margin of sampling error is ±4 percentage points at the 95% confidence level.

Gallup uses a Dun & Bradstreet sample of small businesses nationwide having $20 million or less in sales or revenues. The data are weighted to be representative of U.S. small businesses within this size range nationwide.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit www.gallup.com.

Gallup http://www.gallup.com/poll/174530/small-business-owners-optimism-continues-slow-rise.aspx Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030