Why Are Small Business Owners Less Optimistic Right Now?
Small business owners are an increasingly cheerier group since America exited the Great Recession back in 2007-2009. The Wells Fargo/Gallup Small Business Index has been measuring small business owner sentiment since 2003, and by the end of 2018, small business owners were at their most optimistic ever. The index reading of 129 during Q4 2018 was well above even the 114 reading in 2007 – the peak of small business optimism before the public stock markets collapsed.
However, the most recent reading shows a significant pullback in small business owners’ optimism, dropping down to 106, setting the index back to where it was back in Q2 2018.
While indexes like these ultimately are just a reading of sentiment, not hard data, it’s still important to understand why your fellow entrepreneurs aren’t as optimistic as they were … but also why you shouldn’t worry quite yet.
About That Small Business Optimism Reading …
Small business owners were surveyed between January 9-15. If that sounds familiar, that was in the midst of America’s partial government shutdown. (That alone should tell you something.)
From Gallup, three specific statements about their current business situations and future expectations stand out:
- “45% of owners reported that their revenues increased ‘a lot’ or ‘a little,’ down significantly from 55% last quarter.”
- “Fewer owners now (55%) than in the previous quarter (62%) expect their revenue to increase ‘a lot’ or ‘a little’ in the coming months.
- “Owners also became more negative when assessing their current cash flow — with 66% saying it is ‘very’ or ‘somewhat’ good compared with 74% last quarter.”
That doesn’t necessarily paint a dire picture of the small-business environment, but it’s certainly far from exuberant, and all three are steps back from previous readings. But there are a few reasons not to panic quite yet.
The Good News Is…
That first-quarter reading was taken at a pivotal time for businesses, in which two events were looming large.
For one, business owners were thrown for a loop by the government shutdown, which affected the pockets of roughly 800,000 federal employees … and by proxy, the small businesses that serve those workers. Also fresh in some business owners’ minds was several months’ worth of stock-market losses in what nearly became a bear market in the major stock indexes.
Both issues have since been rectified, with the shutdown now in the rear-view and stocks having recently rebounded.
But if you are wondering about a worst-case scenario, know that small business owners are in general more prepared now too. For instance, 77 percent of owners said they were either “very” or “somewhat” prepared to tackle an economic downturn. And just less than the same amount of business owners who also owned their company back during the recession say they’re more prepared now for a downturn than they were back then.
But what matters most is: Are you prepared? Don’t guess – find out. McManamon & Co. offers a suite of consulting services, covering everything from year-end cash flow strategies to tax planning.
It’s good to keep the pulse of the small business community, but ultimately what matters most is how confident you are in your business, and how able you are to handle economic headwinds. Call McManamon & Co. at 440.892.9088 or contact us online, and we’ll help boost your own small business confidence.
Tags: McManamon, small business, small business optimism | Posted in McManamon & Co., News, small business