Small-business owners are more optimistic than they have been since before the Great Recession, according to the latest Wells Fargo/Gallup Small Business Index.
The overall index is now at 100, up 20 points since November and up 33 points from one year ago. This represents the largest quarterly increase in three years. U.S. small-business owners are the most optimistic than they have been since July 2007. It is nearly 70 points above its all-time low of -29 in the first quarter of 2010. The future expectations score of 60 is up four points from last quarter.
The survey was conducted Feb. 6-10. Owners are usually more positive about the future than they are about present conditions, and that pattern holds in the latest update. Results are based on telephone interviews with 602 U.S. small-business owners in all 50 states. Improvement in the index from the fourth quarter of last year to the first quarter this year is mostly a function of owners’ increased optimism about current conditions, however, with the first-quarter score of 40 representing a 16-point jump since last quarter.
Owners’ overall ratings of their financial situation, cash flow and revenues improved this quarter:
- Improved revenue: 45 percent of small business owners said their revenues increased a little or a lot in the past 12 months, up from 37 percent in November.
- Stronger cash flow: 64 percent indicated their cash flow over the past 12 months was very or somewhat good, up nine percentage points from 55 percent in November and the highest rating on this metric since the third quarter of 2007.
- Overall financial situation: 71 percent said their overall financial situation is very or somewhat good, up from 66 percent in November.
There are several reasons for the more optimistic outlook. Many small business owners hope the Trump Administration will reduce regulations they see as restrictive. A strong stock market and a general rise in economic confidence also are contributing factors.
Regulations are one of the three most important issues small businesses usually want the administration and Congress to focus on. A group of concerns relating to government policies, including government regulations, taxes and the government in general were the first largest concern.
The second-largest category of concerns centers on the economics of running a business, including the basic challenge of finding and attracting customers, the effect of the broad economy and the cost of healthcare.
The third included specific financial concerns, including cash flow, credit and having enough money for investment. Owners also expressed concern about general marketplace issues such as dealing with competitive challenges and marketing, and about hiring and retaining qualified employees.