Looking at the year ahead, business owners anticipate strong revenues, cash flow and capital spending; rate current administration on key issues
SAN FRANCISCO--(BUSINESS WIRE)--Small business owners entered the new year feeling the most optimistic
since early 2007, according to findings from the latest Wells
Fargo/Gallup Small Business Index conducted January 3–9.
In the latest quarterly
survey of small business optimism, the overall Index score came in
at 107, up from 103 in November 2017, and the highest score since early
2007. A jump in the “future expectations” score – which measures how
business owners expect their businesses to perform over the next 12
months – largely drove the improvement in optimism. In January, the
score improved five points to 65, the highest reading since December
2006, the last time the “future expectations” score finished at 65.
“The economy ended 2017 on a high note, and many small business owners
believe that strong momentum will carry over into 2018,” said Mark
Vitner, Wells Fargo Managing Director and Senior Economist at Wells
Fargo. “We are encouraged by the breadth of the improvement this past
year, particularly in quantifiable areas like sales and overall
finances. The more broad-based the gains, the more likely those gains
will be longer lasting.”
In January, 52 percent of business owners reported their revenue
increased a little or a lot over the past 12 months, up from 46 percent
in November 2017 and the highest reading on this measure since 2007. The
survey also showed that many business owners anticipate strong revenues
in the year ahead, with 66 percent saying they expect their company
revenues to increase over the next 12 months, which is the highest
reading on this measure in the history of the survey. Other key drivers
in the first quarter included:
-
Healthy cash flow outlook – Three-fourths (77 percent) of
business owners expect their cash flow will be very good or somewhat
good over the next 12 months, up from 73 percent in November 2017 and
the highest reading on this measure in the history of the survey.
-
Improvements in capital spending – Thirty-eight percent expect
the amount of money their business allocates for capital spending to
increase a little or a lot over the next 12 months, compared to 33
percent in November 2017. This is the highest this measure has been
since December 2003, when it was also 38 percent.
-
Ease of obtaining credit – Forty-six percent expect credit will
be very easy or somewhat easy to obtain, compared to 45 percent in
November 2017.
-
Continued hiring – A third (33 percent) of business owners
expect the number of jobs at their company to increase in the next 12
months, up one percentage point from November 2017.
“Our latest survey tells us that small business owners feel better about
the economy and the future of their businesses,” said Andy Rowe, head of
Customer Segments at Wells Fargo. “We are encouraged to see more
business owners forecasting strong revenues, healthy cash flows, and
increased capital spending over the next 12 months. These trends tell us
that small business owners are more positive about the economy, and that
optimism is translating into investment in the future of their
businesses right now.”
Small business owners rate presidential administration on key issues
The administration generally receives high marks on economic issues
affecting small businesses, but lower marks on non-economic issues, such
as infrastructure improvements, international relations and healthcare
reform.
In January, business owners were asked about the current presidential
administration and its impact on their businesses. More than half of
survey respondents (58 percent) said the current administration
understands the issues that are important to their business and another
58 percent said the administration cares about these issues. Fifty-six
percent said the administration prioritizes these issues, and 55 percent
said the administration is effective at addressing them. When asked to
give the current administration a grade on its performance on issues
important to their business over the past year, about half (49 percent)
gave the administration an “A” or “B,” and a quarter of respondents gave
the administration an “F.”
When it comes to key issues impacting small business owners, 61 percent
said the current presidential administration is doing a very good or
somewhat good job of improving the overall economy, and 53 percent said
the administration is doing a very good or somewhat good job of job
creation. Looking at taxes, 50 percent said the current administration
is doing a very good or somewhat good job on tax reform that impacts
small business owners specifically, and 49 percent said it is doing a
very good or somewhat good job on tax reform overall.i
Regulation reform has been another key issue for business owners, and on
the survey, 46 percent said the current administration is doing a very
good or somewhat good job of regulation reform impacting small business
owners.
However, on non-economic issues, small business owners said that the
current administration is doing a very poor or somewhat poor job on
healthcare reform (50 percent), international relations (45 percent) and
infrastructure improvements, such as roads and bridges (38 percent.)
Small business top challenges
In January, business owners were asked to identify the most important
challenge facing their businesses today. Attracting customers and
finding new business rose to the top of the list at 16 percent, followed
closely by hiring and retaining high quality staff at 13 percent. Other
top concerns this quarter included financial stability and cash flow (10
percent), taxes (10 percent), government regulations (7 percent) and
competition/larger corporations/internet (7 percent). These challenges
have been consistently reported as the top concerns of small business
owners since early 2013, although the order of concerns shifts from
quarter to quarter.
Wells Fargo/Gallup Small Business Index Scores: Q1 2017 – Q1 2018
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Overall Index
Score
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Present
Situation
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Future
Expectations
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Q1 2018 (Surveyed January 2018)
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107
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42
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65
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Q4 2017 (surveyed October 2017)
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103
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43
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60
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Q3 2017 (surveyed July 2017)
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106
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45
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61
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Q2 2017 (surveyed April 2017)
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95
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36
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59
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Q1 2017 (surveyed February 2017)
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100
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40
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60
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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 603 small business owners, with annual revenues up to
$20 million, in all 50 United States conducted Jan. 3-9, 2018. 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, investments, mortgage, and consumer and
commercial finance through more than 8,300 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 263,000 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 (loans under $1 million, 2002-2016 Community
Reinvestment Act 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.
__________________________
i The Q1 Wells Fargo/Gallup Small Business Index survey was
conducted January 3-9, 2018. President Trump signed the rewrite of the
tax code into law on December 22, 2017.