Wells Fargo Survey: Small Business Optimism Declines Amid Decreased Revenues

Survey highlights business preparedness for potential economic downturn and key learnings since 2008 recession

Small business owners indicated declining optimism in the latest quarterly Wells Fargo/Gallup Small Business Index, with an overall Index score of 106. That marks the seventh consecutive quarter in which the score has topped 100, although it is 23 points lower than last quarter's all-time high of 129. The first quarter 2019 survey was conducted Jan. 9–15.

Along with a drop in the overall score, the number of business owners who indicated optimism about their present financial situation dropped to 46, down 13 points from the previous quarter. In addition, optimism about their business' future decreased 10 points to 60. This coincides with decreasing company revenues, with 45 percent of owners saying revenues increased (down 10 percentage points from last quarter) and 25 percent indicating a decrease (up 8 percentage points from the previous quarter). Optimism about revenue in the next 12 months also fell, with 7 percentage points fewer business owners saying they expect revenue to increase in 2019.

"Today's business owners are very in tune with changes in the economy, government policy and many other factors that can affect their ventures," said Andy Rowe, Wells Fargo head of Customer Segments. "They are seeing these factors come into play and are predictably exercising measured caution as they plan for the coming year."

Business preparedness

The survey also asked how prepared business owners are for a future economic downturn. More than three quarters (77 percent) said they were somewhat prepared or very prepared for such an event, compared with 23 percent who said they were not very prepared or not at all prepared. Also, when asked if 2019 would be a year of economic prosperity or difficulty, 67 percent indicated prosperity, and 29 percent indicated difficulty.

Proprietors who owned their businesses during the 2008 recession were asked to compare their preparedness now to that point in time. The number of owners saying they were more prepared now was 75 percent; 14 percent said they were less prepared. In addition, when asked what their greatest lesson was in the decade since the 2008 recession, the most frequent response was conservative capital management and frugality (19 percent). Other lessons included monitoring cash flow (12 percent) and good planning (9 percent).

"With the various economic indicators we've seen, the decrease in revenues and outside factors like the government shutdown, business owners are predictably more cautious than in 2018," said Mark Vitner, Wells Fargo senior economist. "With that said, their responses around preparedness and their continued sense that 2019 will be a prosperous year economically indicate a sense of caution as opposed to a prediction of an economic slump."

Hiring and attracting new business highlighted as top challenges

For the fourth consecutive quarter, a high of 16 percent of business owners indicated hiring and retaining staff is their top challenge; attracting new business rose to nearly the same level as a top challenge, with 15 percent citing it.

Other challenges cited include financial stability/cash flow (9 percent) and taxes (8 percent), both of which continue to be top issues for small business owners.

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 603 small business owners, with annual revenues up to $20 million, in all 50 United States conducted January 9-15, 2019. 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 +129 in the fourth quarter of 2018, and the lowest reading was -28 in the third quarter of 2010.

About Wells Fargo

Wells Fargo & Company 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, investment and mortgage products and services, as well as consumer and commercial finance, through 7,800 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 259,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune's 2018 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 (loans under $1 million, 2002-2016 Community Reinvestment Act 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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