SAN FRANCISCO - February 7, 2012
America’s small business owners are the most optimistic since July 2008, according to the latest findings from the Wells Fargo/Gallup Small Business Index survey for the period Jan. 9-13, 2012. The Index now stands at positive 15 (+15) for January, compared to minus 3 (-3) in October and following two previous Index readings of zero (neither optimistic nor pessimistic).
The Index’s future expectations component (forward looking 12 months) rose to positive 21 (+21) in January, an increase of 13 points from the survey’s last reading, which occurred in October 2011. Driving the increase was a more bullish sentiment across several categories tracked by the survey:
- Revenues – 49% expect revenues to increase a lot or a little, up from 37% in Q4 2011
- Overall financial situation – 63% expect their company’s financial situation to be very or somewhat good over the next 12 months, up from 55% in Q4 2011
- Hiring – 22% expect the number of jobs at their company to increase a lot or a little, up from 15% in Q4 2011; 8% expect the number of jobs at their company to decrease a lot or a little, down from 13% in Q4 2011
- Cash flow – 53% expect their cash flow to be very or somewhat good, up from 48% in Q4 2011
- Credit access – 27% expect credit to be very or somewhat easy to obtain, up from 22% in Q4 2011; 38% expect credit to be very or somewhat difficult to obtain, down from 43% in Q4 2011
In addition to its future expectations component, the Index includes a present situation component (looking back 12 months), which improved to minus 6 (-6) in January, up from minus 11 (-11) in Q4, 2011 and the best reading in this component in three years. Driving this improvement was an increase in business owners who experienced increased revenues (33 percent), ease of accessing credit (25 percent) and increased capital spending (24 percent) over the past 12 months.
“January’s increase in optimism signals that small business owners are seeing a brighter future,” said Doug Case, Wells Fargo’s small business segment manager. “While this economy still presents challenges for many business owners, we are encouraged by expectations for improved revenues, financial situation and cash flow, which have the potential to drive job growth.”
Index Scores: Q1 2011 – Q1 2012
|Overall Index Score||Present Situation||Future Expectations|
|Q1 2012 (surveyed January 2012)||15||-6||21|
|Q4 2011 (surveyed October 2011)||-3||-11||8|
|Q3 2011 (surveyed July 2011)||0||-10||10|
|Q2 2011 (surveyed April 2011)||0||-14||14|
|Q1 2011 (surveyed January 2011)||12||-10||22|
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 highest reading in the history of the Index is 114 recorded in December 2006.
Employment by small businesses poised to grow
More small business owners expect to add new employees (22 percent) than expect to let them go (8 percent) over the next 12 months, an improvement over the previous survey readings. This quarter’s 14 percentage point hiring/firing difference (those who expect to hire versus fire employees) is the largest since January 2008 at the start of the financial crisis. In October, the hiring/firing difference was only 2 percentage points, with 15 percent expecting to add new employees and 13 percent expecting to let them go.
More than half of the survey’s small business owners (52 percent) said they hired employees in the past 12 months, which is little changed from the 51 percent reported in November 2010. However, of this group, more business owners say they have hired as many employees as needed (65 percent, compared to 48 percent in Nov. 2010) versus those who have hired fewer than needed (29 percent, compared to 42 percent in Nov. 2010), an indication of more stable operating environments.
While business owners indicate plans to hire in the next 12 months, they demonstrate some concern around hiring today. Only 15 percent said they are currently looking for new employees. Those who are not looking to hire employees today (85 percent) were asked why not. Key reasons given include:
- Don’t need any additional employees at this time (76 percent)
- Worried revenues or sales won’t justify adding more employees (71 percent)
- Worried about the current status of the U.S. economy (66 percent)
- Worried about cash flow or ability to make payroll (53 percent)
- Worried about the potential cost of healthcare (48 percent)
- Worried about new government regulations (46 percent)
Half of all business owners surveyed said that as a general rule, they find it very difficult (21 percent) or somewhat difficult (32 percent) to find the right qualified employees for their business. And, in the event they can’t afford to hire new employees, owners say they most often turn to their spouse (21 percent), a friend (16 percent), their children (15 percent), or a relative other than child or spouse (11 percent) for unpaid help.
A recorded podcast with Wells Fargo Senior Economist, Dr. Scott Anderson is available on the Small Business Index section of Wells Fargo’s Business Insight Resource Center at www.wellsfargobusinessinsights.com/small-business-index. Listen and download complete survey results.
About the 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 January 9-13, 2012. 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.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) 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 library of videos, articles and webcasts known as the Business Insight Series (www.wellsfargobusinessinsights.com), 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.
Note: Complete survey results available upon request or by visiting www.wellsfargobusinessinsights.com/small-business-index.