Small Business Owners Are Gaining Confidence That Conditions Are Improving

While small business owners are still struggling, there are signs of increasing confidence that sales will increase in the near future. However, the overall mood is still pessimistic …

While small business owners are still struggling, there are signs of increasing confidence that sales will increase in the near future. However, the overall mood is still pessimistic with as many as 77 percent of respondents to one survey citing business conditions as fair or poor. See the following article from The Street for more on this.

There are plenty of must-haves when it comes to starting a business: a great idea, solid plan, creative marketing strategy. And some way to fund all those grand ambitions.

But perhaps the most important factor is also the most intangible: optimism. To make the move from “What if?” to a grand opening, you need to believe that you can and will succeed.

We’ve heard so many disheartening stories about struggling small businesses that it may come as a surprise to hear that many are pulling through the recession with optimism intact. Buried beneath the bad news, there are small, but encouraging, signs that small-business owners haven’t given up hope. And that’s a promising development for the economy as a whole.

Every month, the National Federation of Independent Business surveys owners to produce a monthly Small Business Optimism Index. Not surprisingly, the May report revealed that owners are still struggling. Only 4% of respondents said the next three months would be a good time to expand, and almost 90% reported that they have no job openings.

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However, the optimism index itself, which takes into account 10 business indicators, was at its highest level since October 2009. Another encouraging result came from a question that asked owners to predict whether sales would rise in the next three months. For almost two years, the number of owners who expected sales to fall was higher than the number who predicted sales would increase. In the May report, at last, the optimists slightly outnumbered the pessimists.

The same trend was also evident in the most recent Discover Small Business Watch, which found that 30% of small-business owners surveyed expect economic conditions for their business to get better in the next six months, up from 20% a month ago.

That slight, but heartening, uptick in confidence was also evident in the most recent Wells Fargo(WFC)/Gallup Small Business Index survey, which asks owners to assess their companies’ current financial situation and expectations. Based on the answers to 12 questions — six about a company’s present situation and six about the future — an overall Small Business Index is computed once each quarter.

For the second quarter of 2010, the index was minus-11, indicating that owners overall are more pessimistic than optimistic. However, when asked specifically about future expectations, more gave positive answers than negative. Slightly more than half rated their company’s current financial situation as somewhat or very good.

Modest improvements in revenues, credit availability and capital spending over the past 12 months were the main factors that tipped the index score higher than last quarter. According to Wells Fargo’s senior economist, Scott Anderson, “Small business confidence appears to be stabilizing at a low level. The improvement in consumer and business demand is being felt by small businesses, though concerns about the outlook remain uncomfortably high.”

Another survey of small-business owners, released this month by Citigroup(C), found that 77% rate current business conditions as fair or poor. No surprise there. What are striking are some other numbers: More than half (58%) said their business has performed better than expected over the past year. And 71% said they would start their business again, even knowing the challenges they would face.

That perseverance correlated strongly with age. Although almost a quarter of respondents ages 45 and older said they wouldn’t start their business given what they know now, only 9% of owners 44 and younger agreed. Slightly more than half the younger respondents predicted their businesses would be better off in a year, compared with 41% of older owners.

As a whole, small-business owners are a realistic bunch. They know a recovery will be long and slow. But it’s heartening to see they haven’t given up completely. If they were the kind to quit when times got hard, they most likely never would have started a business in the first place.

This article has been republished from The Street. You can also view this article at
The Street, an investment news and analysis site.

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