Small Business Owner Optimism for the Future Drops to Lowest Point in 2011

In the latest Wells Fargo/Gallup Small Business Index (surveyed October 3-6), business owner responses generated an optimism Index score of minus three (-3), a slight change from the previous two Index readings of zero (neither optimistic nor pessimistic). The future expectations component of the Index has been dropping since the first quarter of 2011 and now sits at eight (down from 10 in Q3 2011).

The future expectations component of the Index has fallen 14 points since the first quarter of 2011, when the Index peaked during the current economic recovery. The decline this quarter was primarily driven by a decline in expectations for increased revenues (37 percent, down from 42 percent in Q3) and an increase in the percentage of business owners saying it will be difficult to obtain credit in the next 12 months (43 percent, up from 37 percent in Q3).

“Small business owners are still navigating this challenging economy,” said Doug Case, Wells Fargo small business segment manager. “In our latest survey, small business owners said that to thrive in today’s economy, they need: increased sales and demand, job creation, and fewer government regulations. While we can’t change the economic environment, we are working diligently to understand what our business customers need and provide them with solutions that help them move forward.”

Business owners were asked about the most important problems facing their businesses today. The top three responses were:

• Complying with government regulations/taxes (22 percent)
• Consumer confidence in the economy (15 percent)
• Depressed consumer spending/lack of customer demand (12 percent).

On the jobs front, only 15 percent of respondents said they expect the number of jobs to increase at their companies over the next 12 months, while 13 percent said they expect a decrease. When asked what would lead them to hire in 2012, business owners said:

• When revenue or sales have increased (27 percent)
• When the economy improves (20 percent)
• If they need to support growth or expansion plans (17 percent).

Robert Lennon, president and CEO of SANDirect, a global data storage company headquartered in Charlotte, NC, has added two new employees this year but when asked about growth, he said, “We anticipate continued growth, but are proceeding with caution.”

“Revenue increases will justify expanding our workforce,” said Lennon. “Ideally I’d like to add up to six more employees in 2012, but I’m hesitant to assume that risk until we see concrete evidence of a market upswing.”

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.

A recorded podcast with Wells Fargo Senior Economist, Dr. Scott Anderson will be available beginning October 27, 2011. Visit the Small Business Index section of Wells Fargo’s Business Insight Resource Center at www.wellsfargobusinessinsights.com/small-business-index to listen and download complete survey results.

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 604 small business owners in all 50 United States conducted October 3-6. 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.

Wells Fargo & Company is a nationwide, diversified, community-based financial services company with $1.3 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 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With more than 270,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 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 is America’s #1 small business lender (2010 Community Reinvestment Act government data) and a leading lender to women- and diverse-owned businesses. With the nation’s largest network of retail banking stores, and an award-winning online Business Insight Series (www.wellsfargobusinessinsights.com) including videos, webcasts and articles, Wells Fargo provides business owners with timely advice and information to educate and help them succeed financially. For more information, or to speak with a Wells Fargo banker, visit wellsfargo.com/biz or call the National Business Banking Center at 1-800-CALL-WELLS.

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.