Small business owners report that marketing to, and driving, customers remains a big challenge. In fact, according to MarketingCharts staff, small business owners are more concerned about attracting customers than government regulations and the economy, citing the Wells Fargo/Gallup Small Business Index.
Gallup Economy pointed out that optimism among United States small business owners is rising, but slowly, and remains below the 2008 recession level, according to the Wells Fargo/Gallup Small Business Index. In 2003, the overall Small Business Index score was +69, rising to +113 in 2007 and dropping to +100 just before 2008. The Index score continued to drop, reaching in the negative numbers in the following years. The quarterly survey of small business owners is now showing a steady increase with an Index score of +45 in January, +47 in April, and +49 as of July.
The Index publishes small business owners’ ratings of the current state of their businesses, as well as the owners’ expectations for the next year, with measurement of financial situations, revenue, cash flow, capital spending, number of jobs, and ease of receiving credit. The Index has been conducted since August 2003 and has been conducted quarterly from December 2003 through July 2014.
Now, small business owner optimism is at its highest level in six years, after a period of highs and lows in the stock market and as the economy has worked to recover from the 2008-2009 recession, wrote Gallup Economy. Today’s current situation is a key factor in the increased optimism being seen by small business owners. For example, the Present Situation component of the Index is now at +18. Although still behind pre-recession levels, the level is now greater than at any point going back to the third-quarter of 2008, wrote Gallup Economy.
A number of factors are contributors to the increase in small business optimism. Namely:
- Small business owners report feeling better about their prior 12 months of revenues. In fact, 43 percent report that their company’s revenues increased in the prior 12 months when compared to 36 percent in the second quarter of this year.
- The highest percentage of small business owners—55 percent—since the first quarter of 2008, have reported a very good or a somewhat good cash flow in the past 12 months, which is up from 50 percent in the second quarter in 2014.
- The ease with which small business owners are obtaining credit has increased slightly in the past 12 months. A total of 32 percent of small business owners report that it has been very easy or somewhat easy to obtain credit in the past 12 months, while 38 percent report that they expect that obtaining credit in the next 12 months will be very easy or somewhat easy.
Although optimism is improving, 13 percent of small business owners report that their “most important challenges” remain attracting customers and tracking down business. Government-imposed “difficulties” related to regulations, the business’ financial stability, and the economy each ranked in at second place and 11 percent, according to Gallup Economy.
Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed the owners of small businesses on current and future perceptions of their business’ financial situation and presents two dimensions of the financial position of small business. These dimensions are the owners’ ratings of their business’ current financial situation and their expectations for the way in which their businesses will perform over the next year. The Small Business Index is computed using a formula that scores and adds the responses to 12 questions and may range from -400 (the most negative) to +400 (the most positive). In reality, the span is much more limited. The highest index reading was +114 in 4th-quarter 2006; the lowest index was -28 in 3rd-quarter 2010.
- MarketingCharts; US Small Biz Owners Say Marketing’s A Big Challenge; August 14, 2014.
- Gallup Economy; U.S. Small-Business Owners’ Optimism Continues Slow Rise; Concerns Over Marketing and Competition Underscore Business Challenges; by Coleen McMurray and Frank Newport; August 7, 2014.