Optimism among small business owners jumped significantly in the latest quarterly Wells Fargo/Gallup Small Business Index, with an overall Index score of 129. That is 11 points higher than last quarter’s score of 118 and the highest in the survey’s 15-year history. The fourth quarter 2018 survey was conducted Nov. 8–14, immediately following the midterm elections.
Survey respondents said positive business financials drove the record high. Eighty percent of respondents rated their financial situation as very good or somewhat good, and 84 percent said they expect their financial situation to be very good or somewhat good over the next year. A record 55 percent of business owners reported increases in revenue, with 62 percent estimating revenue increases in the next year. In addition, 74 percent said they had good cash flow in the past 12 months, and 78 percent said they expect their businesses to have good cash flow over the next year.
“As we head into the end of 2018, small businesses are continuing to indicate that they are thriving and hopeful for the future,” said Andy Rowe, Wells Fargo head of Customer Segments. “With owner optimism hitting its highest level in the 15 years Wells Fargo has been conducting this survey, we are excited to see what this will mean for their continued capital investment and growth.”
Post-election Priorities
The survey also looked at what priorities business owners see as paramount for the incoming U.S. Congress, including several questions asked in the fourth quarter of 2016 following the last national election.
When asked to forecast their operating environment in the coming year, 35 percent said it will be better (down 10 percent from 2016) and 55 percent forecasted no change (43 percent in 2016); 10 percent said it would get worse (11 percent in 2016). In addition, about half of respondents said the actions Congress will take next year will have no impact on their businesses, compared to roughly one quarter of respondents in 2016 who were asked a similar question regarding the new President and Congress.
In April 2018, the Small Business Index survey included a question about owners’ views of the recent tax reform, and 39 percent said they didn’t know how the tax bill would affect their businesses; 27 percent did not expect it to benefit them. Seven months later, taxes continue to be key issue among small business owners. When asked to list the most important issue they would like to see addressed by the new Congress, 29 percent highlighted taxes as the top issue, with 12 percent listing healthcare and 11 percent saying government regulation. When asked what congressional actions will be most important for their businesses, 74 percent said actions relating to tax codes and regulations, while 61 percent said overall small business regulation and 60 percent said actions related to healthcare.
“With the increases we’ve seen in business owners’ revenues and the high degree of confidence business owners have in their cash flow, it’s not surprising that taxes remain a key issue for them,” said Mark Vitner, Wells Fargo Managing Director and Senior Economist. “While the number of business owners that don’t expect changes to their operating environment remains high, most see the current environment as very good and many business owners are looking to expand their business in 2019.”
Top Challenges: Hiring and Attracting New Business
For the third consecutive quarter, survey respondents said hiring and retaining staff was their top challenge, at 18 percent. In addition, the number of business owners who expect to have an increased number of openings in the next 12 months remained steady at 35 percent.
Other challenges cited include attracting new business (10 percent) and taxes (9 percent), both of which have continued to be top issues for small business owners.
Ease of Access to Credit Increases
The percentage of small business owners who said obtaining credit was somewhat or very easy in the past 12 months rose to 47 percent, compared with 40 percent last quarter. Half of business owners surveyed said they expect credit will be easy to obtain over the next year. Further underlining owner optimism around the ability to access this credit, only 1 percent of respondents said access to credit was the most important challenge they face.