Small businesses report improved revenues, cash flow and access
to credit; business owners are saving for retirement, feel
confident about financial matters in retirement
Small business owners are the most optimistic they have been
since the start of the Great Recession, according to the latest
findings from the Wells Fargo/Gallup Small Business Index,
conducted Feb. 6-10.
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Small Business Owner Optimism Surges in
First Quarter (Graphic: Business Wire)
In the quarterly small business survey, which measures the
optimism of small business owners, the overall Index score
increased significantly to 100 in February, up from 80 in November
and up 33 points from a year ago. This marks the highest optimism
reading since July 2007 when it was also 100, and represents a
return to pre-recession levels.
Small Business Index Key Drivers
Several factors contributed to the jump in small business
optimism this quarter, most notably, how business owners rate their
current business conditions. The present situation score – how
business owners gauge their perceptions of the past 12 months –
shot up 16 points to 40 in February, representing the largest
quarter-over-quarter increase in the history of the survey. The
future expectations score – how business owners expect their
businesses to perform over the next 12 months – climbed four points
to 60.
Other key drivers this quarter included:
- Better financial situation –
Seven in 10 (71 percent) said their current financial situation is
very or somewhat good, up from 66 percent in November
- Increasing revenues – Almost
half (45 percent) said their business’s revenue increased a little
or a lot over the past 12 months, up from 37 percent in
November
- Stronger cash flow – Sixty-four
percent said that their cash flow was very or somewhat good over
the past 12 months, up from 55 percent in November
- Access to credit – Forty percent
said that credit was somewhat or easy to obtain over the past 12
months, up from 34 percent in November
“As small businesses are the backbone of our economy, it’s
promising to see that business owners have entered 2017 feeling
confident and that many are seeing positive trends in their
businesses,” said Lisa Stevens, Wells Fargo head of Small Business.
“Our latest survey shows us that more business owners are reporting
stronger current financials and are well positioned for the coming
year, which is helping boost the Index score to its highest mark in
nearly a decade. There are many reasons for small business owners
to feel optimistic about the future in today’s economy, and we hope
this momentum continues in the year ahead.”
Looking through a long-term lens
Small business owners were asked about their retirement plans in
February, and overwhelmingly the survey found that most plan to
work for as long as possible with 73 percent expecting to either
cut back on work but always maintain some involvement in the
business, or never retire until they are unable to work. Another 19
percent expect to sell or transition the business in order to do
something else and just six percent said they expect to retire and
stop working completely. In fact, more than half of survey
respondents said that if money were no object today, they would
continue working in their business either full or part-time; 27
percent said they would retire completely and 17 percent said they
would start another new business.
The February survey also found that most small business owners
do not have a clear strategy for business succession, as 70 percent
said they do not have a formal, written plan in place to outline
what they’ll do with their business when they retire or are unable
to work. When asked the main reason why they do not have a
transition plan for their business, more than half (51 percent)
said it is not a priority at this time and 17 percent said they
don’t know today how they’ll transition the business. Twenty-one
percent cited some other reason, and seven percent said they do not
have time to work on a plan. Of the small business owners who do
not currently have a formal, written plan, 59 percent plan to
create one before they retire or stop working.
“A great challenge for small business owners can be developing a
business transition strategy for how to handle business operations
when they are ready to retire,” said Tony McEahern, head of Wealth
Planning for Wells Fargo Private Bank. “Building a transition plan
should be part of the overall business planning process from the
beginning. It’s important to put a formal succession plan in place,
which outlines the management roles as their business grows,
evolves and changes.”
Small business owners are saving for the future
Small business owners also said they are actively saving for
retirement. In the February survey, 82 percent of small business
owners said they are currently saving or investing money toward
their retirement, and 76 percent said they think they’ll have
enough money to live comfortably in retirement, up 10 percentage
points from when this question was last asked in January 2014.
Small business owners also reported fewer concerns regarding their
financial matters in retirement:
- Forty-six percent said they are very or
moderately worried about being able to pay medical costs of a
serious illness or accident in retirement, down from 57 percent in
January 2014
- Less than half (42 percent) are very or
moderately worried about being able to build back retirement
savings lost during the recent economic downturn, down from 50
percent in January 2014
- Just 21 percent said they are very or
moderately worried about being able to sell their business when
they are ready to, down from 33 percent in January 2014
Small Business Challenges
When business owners were asked to identify the most important
challenges facing their business today, government regulations rose
to the top of the list (14 percent) followed by attracting
customers and finding new business (12 percent) and taxes (9
percent). Hiring and retaining quality staff, the economy and
financial stability/cash flow were also reported as top concerns (8
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 2016– Q1 2017
Overall Index Score Present
Situation Future Expectations Q1 2017
(surveyed February 2017) 100 40 60
Q4
2016 (surveyed November 2016) 80 24 56
Q3 2016 (surveyed July 2016) 68 29 39
Q2 2016 (surveyed April 2016) 64 24 40
Q1 2016 (surveyed January 2016) 67 26
41
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 February 6-10, 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. Founded in 1852 and headquartered in San Francisco, Wells
Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through more than 8,600 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
269,000 team members, Wells Fargo serves one in three households in
the United States. Wells Fargo & Company was ranked No. 27 on
Fortune’s 2016 rankings of America’s largest corporations. Wells
Fargo’s vision is to satisfy our customers’ financial needs and
help them succeed financially. 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, in 2014 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170313005244/en/
Wells Fargo & CompanyAlice Hartnett,
704-715-9115@AHartnettWFalice.hartnett@wellsfargo.comSarah DuBois,
612-466-7484@SDuboisWFsarah.dubois@wellsfargo.com
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