Small business owners report lower revenues despite year-over-year improvements
SAN FRANCISCO--(BUSINESS WIRE)--Small business owners reported being less optimistic in the latest Wells
Fargo/Gallup Small Business Index, due to small declines in how they
regard their business financial situation, most notably current
revenues. The modest decline in optimism follows a significant jump in
small business optimism at the end of 2014 and early 2015.
In a quarterly small business survey conducted April 6-10, the overall
Index score, which measures small business owner optimism, dipped from
71 in January to 64 in April, representing the first significant
decrease since November 2012. The second-quarter Index score is still
considerably higher than it was in the second quarter of 2014 when the
score was 47 and 2013, when the score was 16.
Several factors contributed to the decrease in optimism this quarter,
including:
-
Lower revenue – In the April survey, 42 percent of small
business owners reported that their company’s revenues increased over
the past 12 months, down from 49 percent in January. However, the
percent of business owners indicating revenue had increased is up from
a year ago when it was 36 percent.
-
Slight drop in credit expectations – When asked about access to
credit, almost a third (30 percent) of small business owners said it
was very or somewhat easy to obtain credit when they needed it, down
slightly from 34 percent in January. Another 25 percent said credit
was very or somewhat difficult to obtain in April, up from 20 percent
in January and relatively unchanged from a year ago when it was 24
percent.
In a few areas, small business owners reported incremental improvements
in their business, including:
-
Highest Cash Flow in Seven Years – Fifty-eight percent of small
business owners reported that their company’s cash flow was very or
somewhat good over the past 12 months, up from 54 percent in January
and 50 percent a year ago. The percentage of business owners reporting
good current cash flow is the highest since the first quarter of 2008.
-
Improved Financial Situation – Sixty-five percent of small
business owners rate their company’s financial situation as very or
somewhat good, unchanged from the January survey and up from 57
percent a year ago.
“The latest Index scores show that while small business owners are in a
better place now than a year ago, some still face challenges in this
economic environment,” said Lisa Stevens, Wells Fargo head of Small
Business. “A decline in revenues can influence business owner
perceptions of current conditions and temper their optimism for the year
ahead. Despite the pull back in optimism this quarter, there’s more
certainty in today’s economy than at this time last year, and we’re
seeing more promising trends.”
Challenges
When business owners were asked to identify the most important challenge
facing their business, several concerns rose to the top of the list in
the April survey. Business owners said their top concern was attracting
customers and finding new business (14 percent), followed by government
regulations (11 percent) and the economy (11 percent). These top
challenges have been consistently reported as top concerns of small
business owners since early 2013, when the question was added to the
survey.
Small Business Hiring Landscape
In the April survey, small business owners also were asked about hiring
trends and plans. Just 16 percent of small business owners reported
increasing the number of jobs at their company in the last 12 months,
compared to 19 percent in January 2015 and 14 percent at this time last
year.
While small business owners report finding qualified staff as their
biggest hiring challenge, 40 percent said that the candidates who apply
for jobs at their business are over- or under-qualified for the
position, and another 33 percent report not having the time and
resources to devote to finding the best candidates.
Beyond these challenges, small business owners are faced with an
increasingly competitive hiring landscape today. In the April survey,
small business owners cite several perceived barriers to hiring the most
qualified staff, including:
-
More than two-thirds (68 percent) say they can’t compete with the
benefits and salaries that larger companies offer.
-
Fifty-seven percent believe they can’t afford to offer the benefits
that qualified candidates want.
-
Almost half (48 percent) are unable to offer full time status to
qualified candidates.
-
Forty-five percent can’t offer flexible schedules or telecommuting
options, and another 40 percent say they can’t provide technology such
as smart phones, tablets or laptops to qualified candidates.
In spite of these challenges, business owners who are not looking to
hire are most likely to report that they simply do not need employees
(76 percent). While less than one in four employers (22 percent) report
that they are planning to hire in the next 12 months, among those who
do, most will turn to their personal networks and technology to help
them find new staff. Such is the case with Mark Bitterman, owner of
Portland, Ore.-based The Meadow Marche, Inc., which sells fine sea
salts, dark chocolate and other gourmet items.
“To keep up with our growing business and seasonal staffing needs, we’ve
hired 20 employees across our three locations in the last year. We plan
to add two additional full-time employees this year,” said Mark
Bitterman, owner of The
Meadow Marche, Inc. “We try to give our staff as much support as
possible, including flexible work schedules, heath care and retirement
benefits, and vacation. We also turn to our existing employees for
referrals when we’re looking for new employees.”
A vast majority of small business owners (88 percent) say that their
most commonly used resource for finding employees is asking friends,
family and other business owners for recommendations. Another 26 percent
of owners report using LinkedIn or another business social media site to
source candidates. Few small businesses report using a paid recruiter (7
percent).
When asked about hiring practices in the past, 79 percent of small
business owners reported having contacted previous employers for
references, while another 28 percent said they’ve conducted a paid
criminal background check. A fourth of survey respondents (25 percent)
say they look up a candidate’s postings and history on personal social
media sites, such as Facebook and Twitter.
Small Business Index Key Drivers
Wells Fargo and Gallup survey small business owners across the nation
each quarter 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: Q2 2014 – Q2
2015
|
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|
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Overall Index
|
|
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Present
|
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|
Future
|
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Score
|
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Situation
|
|
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Expectations
|
Q2 2015 (surveyed April 2015)
|
|
|
64
|
|
|
24
|
|
|
40
|
Q1 2015 (surveyed January 2015)
|
|
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71
|
|
|
28
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|
|
43
|
Q4 2014 (surveyed November 2014)
|
|
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58
|
|
|
21
|
|
|
37
|
Q3 2014 (surveyed July 2014)
|
|
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49
|
|
|
18
|
|
|
31
|
Q2 2014 (surveyed April 2014)
|
|
|
47
|
|
|
14
|
|
|
33
|
|
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|
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|
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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 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 601 small business owners in all 50 United States
conducted April 6-10 2015. 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. The highest Index reading was +114 in the fourth quarter of
2006, and the lowest reading was -28 in the third quarter of 2010.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.7 trillion in assets.
Founded in 1852 and headquartered in San Francisco, Wells Fargo provides
banking, insurance, investments, mortgage, and consumer and commercial
finance through more than 8,700 locations, 12,500 ATMs, and the internet
(wellsfargo.com) and mobile banking, and has offices in 36 countries to
support customers who conduct business in the global economy. With
approximately 266,000 team members, Wells Fargo serves one in three
households in the United States. Wells Fargo & Company was ranked No. 29
on Fortune’s 2014 rankings of America’s largest corporations. Wells
Fargo’s vision is to satisfy all our customers’ financial needs and help
them succeed financially. Wells Fargo perspectives are also available at Wells
Fargo Blogs and Wells
Fargo Stories.
Wells Fargo serves approximately 3 million small business owners across
the United States and loans more money to America’s small businesses
than any other bank (2002-2013 CRA government data). To help more small
businesses achieve financial success, in 2014 Wells Fargo introduced Wells
Fargo Works for Small Business℠ – a broad initiative to
deliver resources, guidance and services for business owners – and a
goal to extend $100 billion in new lending to small businesses by 2018.
For more information about Wells Fargo Works for Small Business,
visit: WellsFargoWorks.com.
Follow us on Twitter @WellsFargoWorks.
About Gallup
For more than 70 years, Gallup has been a recognized leader in the
measurement and analysis of people’s attitudes, opinions and behavior.
While best known for the Gallup Poll, founded in 1935, Gallup’s current
activities consist largely of providing marketing and management
research, advisory services and education to the world’s largest
corporations and institutions.