SURVEY: Small Business Owner Optimism Hits Highest Level in Five Years; Retirement Concerns Persist

Wells Fargo/Gallup survey: Small business cash flow and hiring are up as the economy improves; retirement concerns persist

Small business owners are the most optimistic they have been in five years, according to the latest Wells Fargo/Gallup Small Business Index, and expect their businesses to increase cash flow and hire more employees in 2014.

In a small business survey conducted Jan. 6-10, the overall score increased to a positive 45 (+45) in January, up from a positive 24 (+24) in October 2013. While this score is the highest it has been since the third quarter of 2008, it is still well below pre-recession levels.

Several factors contributed to this quarter’s increase in small business optimism compared to fourth quarter 2013:

• Improved cash flow: In the January survey, more small business owners said they had good cash flow over the past 12 months than they did last quarter (52 percent compared to 46 percent).  A larger majority of business owners also expect to have good cash flow in 2014 (57 percent compared to 52 percent).
• Increasing hiring: More small business owners said they expect to increase hiring in the next 12 months than in last quarter’s survey (22 percent compared to 16 percent).
• Increasing revenue: A larger percentage of small business owners expect their revenue over the next 12 months to increase (48 percent compared to 44 percent).
• Accessing credit: Fewer small business owners in the current survey reported having difficulty obtaining credit than did so last quarter (23 percent compared to 27 percent).

“There are many reasons for small business owners to view 2014 as a promising year,” said Lisa Stevens, Wells Fargo lead executive for Small Business and Pacific Midwest Regional Banking president. “There’s less uncertainty in the economy than there has been for quite some time. Congress approved a federal budget deal at the end of last year. The stock market performed well in 2013, and capital spending has picked up. With each piece of good news, business owners gain a little more confidence to grow and expand. We know that small business owners still face many challenges, yet hope this momentum continues as the economy improves further.”

Challenges

When business owners were asked to identify the most important challenge facing their businesses, several concerns rose to the top of the list. In January, business owners once again said their top concern was finding new business (21 percent).  Other top concerns included the economy (11 percent), government regulations (11 percent), hiring (8 percent) and healthcare (8 percent).

The Future – Retirement

In the January survey, small business owners were also asked about planning for retirement. A majority of small business owners said they aren’t ready to sell their businesses or stop working yet. More than half of business owners said they estimate the best time to sell would be in the next 1-10 years. About a quarter of those surveyed said the best time would be more than 10 years from now. Yet, a majority of business owners said they are not worried or not too worried about being able to sell their businesses when they are ready (62 percent).

In the January survey, a majority of small business owners (55 percent) said if money were no object they would opt to continue working full or part-time, while 26 percent said they would retire completely, 13 percent would start another business and only 4 percent would choose to work for someone else.

Small business owners still have some financial concerns about retirement but  are feeling a little more optimistic: About two-thirds of small business owners (66 percent) anticipate that they will have enough money to live comfortably in retirement (up from 63 percent in third quarter 2010, when businesses were last surveyed on retirement).

• More than half of business owners (57 percent) are either very or moderately worried about not being able to pay medical costs for a serious medical issue in retirement.  In third quarter 2010, 64 percent were worried.  About half of business owners (55 percent) are either very (26 percent) or moderately worried (29 percent) that they will not have enough money in retirement.  The percentage reporting worry in third quarter 2010 was 64 percent.
• Fewer business owners are worried about building back retirement income lost in the recession (50 percent are either very or moderately worried, down from 68 percent in third quarter, 2010).  This latest finding may indicate that small business owners are feeling more positive about the performance of retirement funds and the market in general.

Small Business Index Key Drivers

Wells Fargo, together with Gallup, surveys small business owners quarterly across the nation to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring, and credit availability.

Wells Fargo/Gallup Small Business Index Scores: Q1 2013 – Q1 2014

About the 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 consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. Results are based on telephone interviews with 603 small business owners in all 50 United States conducted

January 6-10, 2014.  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 zero indicates that small business owners, as a group, are neutral — neither optimistic nor pessimistic — about their companies’ situations.   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 margin of sampling error is +/- four percentage points.

Note:  Complete survey results available upon request or on the Wells Fargo Business Insight Resource Center.