Small business optimism continues to improve, and business owners are
feeling more positive about the year ahead, according to the latest Wells
Fargo/Gallup Small Business Index.
Overall, optimism among small business owners has reached the highest
level in six years. In a quarterly survey of small business owners,
conducted March 31-April 4, the overall Small Business Index score moved
to positive 47 (+47) in April, up two points from positive 45 (+45) in
January 2014. Future expectations are helping increase optimism. The
future expectations score, now at a positive 33 (+33), is higher than at
any point the since the start of 2008, however it is still well below
pre-recession levels.
Several factors contributed to this modest improvement in small
business optimism:
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Small business owners are more positive about their ability to obtain
credit in the year ahead. The percent of businesses expecting credit
to be difficult to obtain the next 12 months (26 percent) is at its
lowest level since the third quarter of 2008.
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Capital spending is slightly more positive. For the second consecutive
quarter, more business owners expect to increase the amount of money
allocated for capital spending (28 percent) than decrease (23 percent)
over the next 12 months.
“The trend of business owners feeling more confident each quarter is a
positive sign, yet the level of improvement we see today remains small,
and we’re less than halfway between the lowest point in our survey’s
10-year history and the highest levels of business owner sentiment
reached in 2006,” said Lisa Stevens, Wells Fargo head of Small Business
and Pacific Midwest regional banking president. “These results are one
more indicator that the recovery continues for small businesses. During
National Small Business Week, we think it’s as important as ever for our
country to focus on this important segment of our economy, and start a
national conversation on what’s needed to restore small business owner
confidence to pre-recession levels.”
Small Business Owner Satisfaction
As optimism gradually improves, business owners are feeling more
satisfied with their work. When asked how satisfied they are being a
small business owner, a firm majority (56 percent) say that they are
either extremely or very satisfied, up from 51 percent in the
third-quarter 2013.
In the April survey, 92 percent of business owners reported feeling
somewhat, very or extremely successful. In addition, a strong majority
(84 percent) of business owners report they would do it all over again.
Rewards and Challenges of Starting a New Business
Entrepreneurs start their own businesses for a variety of reasons. In
the second-quarter Index, a majority of respondents said securing their
financial future (69 percent), being their own boss (66 percent) and
setting their own hours (51 percent) were among the reasons they became
business owners.
When opening their business, owners said they used personal savings (77
percent), a loan or credit from a financial institution (41 percent),
and family and friends (33 percent) as sources of funding.
Financial challenges were the top concerns business owners had when they
first set out. When owners were asked to identify the most important
challenge they faced when they first opened their business, the number
one challenge was securing accounts and customers (23 percent). Other
top mentions included cash flow (15 percent) and credit
financing/availability of funds (10 percent). Only 2 percent of business
owners reported the personal sacrifice and long hours involved in
running a business as their biggest challenge.
Even though business owners reported financial challenges when they
started out, they are not in business simply to make money. Survey
respondents said the most rewarding aspects of owning a small business
were the independence of being your own boss (42 percent), job
satisfaction (17 percent), flexibility (12 percent), and interactions
with customers (11 percent). Only 7 percent of respondents said the
financial rewards (7 percent) were the most rewarding aspect.
Business owners are reporting financial success. In the second quarter
survey, about eight in 10 (81 percent) small business owners reported
being mostly profitable since opening their business.
Small Business Index Key Drivers
Wells Fargo, together with Gallup, surveys small business owners
quarterly across the nation to gauge their perceptions of their present
situation (past 12 months) and future expectations (next 12 months) in
six key areas: financial situation, cash flow, revenues, capital
spending allocation, hiring, and credit availability.
Wells Fargo/Gallup Small Business Index Scores: Q2 2013 – Q2 2014
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Overall Index Score
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Present Situation
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Future Expectations
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Q2 2014 (surveyed April 2014)
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+47
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+14
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+33
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Q1 2014 (surveyed January 2014)
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+45
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+16
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+29
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Q4 2013 (surveyed October 2013)
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+24
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+7
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+17
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Q3 2013 (surveyed July 2013)
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+25
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+4
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+21
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Q2 2013 (surveyed April 2013)
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+16
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+2
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+14
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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 600 small business owners in all 50 United States
conducted March 31-April 4, 2014. 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
positive 114 (+114) in fourth quarter of 2006, and the lowest reading
was negative 28 (-28) in third quarter of 2010.
Wells Fargo serves more than 2.5 million small business owners across
the United States and loans more money to America’s small businesses
than any other bank (2002-2012 CRA government data). To help more small
businesses achieve financial success, in 2014 Wells Fargo introduced Wells
Fargo Works for Small BusinessSM
– a broad initiative to deliver resources, guidance and services
for business owners – and a goal to extend $100 billion in new lending
to small businesses by 2018. For more information about Wells Fargo
Works for Small Business, visit: WellsFargoWorks.com.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.5 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 9,000 locations, 12,500 ATMs, and the internet
(wellsfargo.com),
and has offices in 36 countries to support customers who conduct
business in the global economy. With more than 265,000 team members,
Wells Fargo serves one in three households in the United States. Wells
Fargo & Company was ranked No. 25 on Fortune’s 2013 rankings of
America’s largest corporations. Wells Fargo’s vision is to satisfy all
our customers’ financial needs and help them succeed financially. Wells
Fargo perspectives and stories are also available at blogs.wellsfargo.com
and at wellsfargo.com/stories.
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.
Note: Complete survey results available upon request or at wellsfargoworks.com.
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