Small business optimism levels off in the fourth quarter following a year of gains; business owners report steady revenues and healthy cash flow
SAN FRANCISCO--(BUSINESS WIRE)--Following the largest increase in a decade, small business optimism held
steady in the fourth quarter, according to the latest Wells
Fargo/Gallup Small Business Index, conducted October 2–6.
In the quarterly
survey, which measures the optimism of small business owners, the
overall Index score dipped slightly to 103 in October – down from 106 in
July when it was the highest Index reading in a decade. A contributing
factor to the three-point decrease was how business owners evaluated
their current finances. Seventy-one percent rated their financial
situation today as very or somewhat good in October, down five
percentage points from 76 in July. Despite this slight decline, business
owners’ financial situation remains at pre-recession levels.
Hiring Remains a Top Challenge
In October, business owners were asked to identify the most important
challenge facing their businesses today. Sixteen percent of small
business owners said hiring and retaining quality staff is their top
concern, up from 13 percent last quarter and the highest reading on this
measure since the question was added to the survey in 2013. While hiring
is a top challenge, 32 percent of business owners reported plans to
increase the number of jobs at their business in the next year – the
second highest percentage in the 14-year history of the survey. Other
top concerns this quarter included attracting customers and finding new
business (11 percent), taxes (11 percent), government regulations (11
percent), and financial stability/cash flow (8 percent).
“Hiring the workers they need has clearly become a more pressing issue
for small business owners,” noted Mark Vitner, Senior Economist at Wells
Fargo. “Labor markets have tightened around the country and many workers
that had been employed part-time have moved on to full-time positions,
making it particularly difficult to fill these positions right now.”
Most other survey measures were unchanged or had incremental shifts in
the fourth quarter, including:
-
Steady Revenues –Almost half (46 percent) said their business’
revenue increased over the past 12 months, unchanged from the previous
two quarters and up from a year ago, when it was 37 percent.
-
Healthy Cash Flow – Continuing an upward trend, 65 percent of
small business owners rated their company’s cash flow as very or
somewhat good over the past 12 months, up from 63 percent from the
previous two quarters and from 55 percent a year ago.
-
Ease of obtaining credit – Again this quarter, 39 percent said
credit was very or somewhat easy to obtain over the past 12 months, up
from 34 percent a year ago.
-
Plans to hire – About a third (32 percent) reported plans to
hire in the next 12 months, compared to 27 percent in July.
“It’s promising to see that, in general, business owners are maintaining
a positive outlook as we move toward the end of the year,” said Andy
Rowe, Wells Fargo head of Customer Segments. “Despite this quarter’s
modest decline, business owner optimism has improved 23 points
year-over-year and is still holding steady at post-recession highs. As
we look ahead to 2018, it’s a positive sign that business owners
continue to report capital spending plans at the stronger levels
achieved at the end of 2016, and that one in three are looking to add
new staff.”
Small Business Marketing and Payment Trends
The latest survey also asked business owners about their technology use,
and found that only about half are making changes to the way they market
and operate their businesses. When asked how they use social media in
their business, more business owners reported an active presence on
Facebook (53 percent) than any other social media platform. In addition,
53 percent said social media is very or somewhat important for marketing
to new and existing customers, followed closely by advertising (52
percent). The latest survey also shows that business owners are making
small strides to update their online and e-commerce presence. In the
next 12 months, 53 percent of business owners plan to update their
websites and 51 percent plan to increase their online presence through
online marketing and social media sites. About a third plan to increase
efforts to interact with customers via online or mobile apps, and a
third plan to increase their business’ e-commerce presence.
When it comes to payments, some business owners appear to be embracing
new technologies or making changes to the types of payments their
business accepts. The top form of accepted payments remains in-person
cash or check at 88 percent, followed by mailed payment via check at 82
percent. Thirty-nine percent of business owners now accept in-person
credit and debit card payments using traditional point-of-sale
terminals, up from 31 percent in January 2016. And 33 percent accept
credit or debit card payments via a mobile point-of-sale terminal, such
as Square, up from 20 percent in January 2016. Twelve percent of
business owners said they accept digital wallet payments, compared to 5
percent in January 2016.
Small Business Index Key Drivers
In October, the “present situation” score – how business owners gauge
their perceptions over the past 12 months – decreased slightly to 43,
down from 45 in July when it was at the highest point in a decade. The
“future expectations” score – how business owners expect their
businesses to perform over the next 12 months – remained relatively
unchanged at 60.
Wells Fargo/Gallup Small Business Index Scores: Q4 2016– Q4 2017
|
|
|
Overall Index
|
|
Present
|
|
Future
|
|
|
Score
|
|
Situation
|
|
Expectations
|
Q4 2017 (surveyed October 2017)
|
|
103
|
|
43
|
|
60
|
Q3 2017 (surveyed July 2017)
|
|
106
|
|
45
|
|
61
|
Q2 2017 (surveyed April 2017)
|
|
95
|
|
36
|
|
59
|
Q1 2017 (surveyed February 2017)
|
|
100
|
|
40
|
|
60
|
Q4 2016 (surveyed November 2016)
|
|
80
|
|
24
|
|
56
|
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 602 small business owners, with annual revenues up to
$20 million, in all 50 United States conducted Oct. 2-6, 2017. 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 diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo’s
vision is to satisfy our customers’ financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through more than 8,400 locations,
13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has
offices in 42 countries and territories to support customers who conduct
business in the global economy. With approximately 268,000 team members,
Wells Fargo serves one in three households in the United States. Wells
Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of
America’s largest corporations. News, insights and perspectives from
Wells Fargo are also available at 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 (2002-2015 CRA government data). To help more small
businesses achieve financial success, Wells Fargo introduced
Wells
Fargo Works for Small Business
®
–
a broad initiative to deliver resources, guidance and services for
business owners. 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.