Small business optimism levels off in the
fourth quarter following a year of gains; business owners report
steady revenues and healthy cash flow
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.
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The Q4 Wells Fargo/Gallup Small Business
Index (Graphic: Business Wire)
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20171106005362/en/
Alice Hartnett,
704-715-9115alice.hartnett@wellsfargo.com@AHartnettWForSarah
DuBois, 612-466-7484sarah.dubois@wellsfargo.com@SDuboisWF
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