Small-Business Surveys Skewed

The sentiment among small-business owners in the U.S. is a favored topic among market analysts, in part because there is always a wealth of data from which to …

The sentiment among small-business owners in the U.S. is a favored topic among market analysts, in part because there is always a wealth of data from which to pluck various statistics in an effort to bolster an opinion on the state of affairs. One pundit will say the outlook for 2012 is dismal while another will say there is room for hope, and both will be based on the same Labor Department facts. For example, one survey of 3,000 business owners by U.S. Bank found that 70% felt their business is doing “good,” “very good,” or “excellent,” which hardly seems to mesh with wider reports of economic concern. For more on this continue reading the following article from TheStreet.

There’s nothing like a survey to give a news story a quick, easy hook, which is why they show up in so many newspaper stories, website postings and TV news segments. Pick any topic, and chances are a sampling of Americans has been asked about it (allowing writers, in turn, to give their opinions of the opinions).

Small-business sentiment is an especially popular subject. With regular surveys of small-business owners being conducted by financial institutions and professional associations, it’s relatively easy to make generalizations about this crucial segment of the U.S. economy. But doing so can also be misleading.

Take a look through the most recent research on small-business confidence and some common themes come through: Owners are feeling better than they did two or three years ago, they’re worried about the health of the U.S. economy and reluctant to take risks.

Look at certain numbers and you can make a strong case things are getting better. Consider other measures, and you can proclaim the business climate remains dismal. Whether things are "good" or "bad" for small companies depends in large part on context.

If you want to put a positive spin on things, consider a recent survey of 3,000 business owners conducted by Minneapolis-based U.S. Bank. Almost 70% described their company’s financial health as "good," "very good" or "excellent." Asked to name their biggest concern, most said general economic uncertainty; the second-most popular answer, "poor sales," was cited by only 12% of owners.

These findings are consistent with a 2011 year-end survey by the National Small Business Association, which found that 75% of small-business owners were confident about the future of their business, even though only 20% believed the overall economy would grow in 2012.

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The most recent Index of Small Business Optimism, released monthly by the National Federation of Independent Businesses, found that overall, optimism levels for the first half of 2012 are the highest they’ve been since late 2007. But the future doesn’t look particularly bright: only 7% of owners think the next three months will be a good time to expand.

A survey of 700 businesses this spring by San Francisco-based Union Bank highlighted how difficult it is to make grand generalizations, since individual experiences vary so widely. About half of the owners surveyed said the business climate has worsened over the past two years, but the same percentage also believes it will improve over the coming two years. Over the past year, one-third of respondents saw sales go up, one-third maintained steady sales and one-third saw sales fall. So what’s the headline?

That even three-way split was also seen in the most recent Wells Fargo/Gallup Small Business Index Survey, in which 36% of the owners surveyed said revenue had increased over the past year, 24% said it stayed the same and 39% saw revenue decrease.

Overall, optimism levels in this quarterly survey were at their highest point since the fall of 2008. About half the respondents expected revenue to increase in the next year, with only 15% predicting their company’s financial situation would be "somewhat" or "very" poor.

But that sunny outlook hasn’t carried over into hiring. According to the Union Bank and Wells Fargo/Gallup surveys, only about 20% of owners expect to do any hiring over the coming year. The NFIB survey found that less than 10% of respondents plan to hire more workers in the next three months.

So what can we conclude from all these stats?

The worst is (hopefully) over. Overall, the optimism of business owners is higher than it’s been in years.

The small picture is better than the big picture. Business owners may have little faith in a speedy recovery for the U.S. economy, but they’re becoming more confident about their own chances of success.

Hiring remains weak. Owners may feel better, but they’re still wary of taking on the expense of new employees. Which means we can’t depend on small businesses to make much dent in the unemployment rate, at least in the near future.

But perhaps the most important lesson to take away is that American small businesses defy easy categorizations. Some are thriving, others are on their last legs. No matter what a survey says, there will always be examples that don’t fit the mold.

And isn’t that a good thing?

This article was republished with permission from TheStreet.


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