October 25, 2014

Trouble Again in the Small Business Sector?

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Several recent indicators suggest that the small business sector may be weakening again.

• Revenue growth has flattened. The Intuit Small Business Revenue Index, which uses data from users of QuickBooks Online to measure small company sales, increased by only 0.01 percent in April, a significant decline from the 0.4 percent the measure increased last December.

• Small business owners’ sales expectations are weakening. The fraction of respondents to the National Federation of Independent Business’s (NFIB) monthly survey of its members who report expectations of rising sales over the coming three months shrank from 9 to 6 between December 2011 and April 2012.

• Small business employment growth is slowing. The percentage of respondents to the NFIB survey who increased employment over the previous three months declined from a net of positive 1 percent in December 2011 to a net of negative 4 percent in April 2012.

• Small company employees are working less. The Intuit Employment Index, which measures employment-related activities at companies with fewer than 20 employees who use Intuit Online Payroll, shows that the number of hours worked by hourly employees has dropped 2 percent since December 2011.

• Fewer companies are borrowing. The Thomson Reuters/PayNet Small Business Lending Index, which measures the total amount of small company credit, is 15 percent below where it was last December.

• Small business owners are more reluctant to expand. The NFIB survey indicates a decline in the share of small business owners who think the next three months are a good time to expand their businesses from 10 percent in December 2011 to 7 percent in April 2012.

Making economic forecasts is a tricky business, made more difficult for the small business sector by the lack of precise measures being released by the government in a timely manner. Moreover, measures other than the ones mentioned above tell a more positive story about what’s been happening with small businesses lately. However, these negative signs have me concerned that small business sector is weakening once again.

5 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

5 Reactions

  1. I wonder how much of this data is a self fulfilling prophecy. Perhaps, small business owners here this news and than think even worse of the economy and the outlook for their business.

  2. The reluctance to expand and the reduce borrowing don’t worry me because I feel they reflect the more conservative nature of SMBs that we see post-recession. However, it’s not good to see lowered expectations since I thought expectations were pretty low to begin with.

  3. Scott, certainly worth reading and noting, but I say keep moving, taking action and always believe in optimism and hope. We all need to work through these cycles and reports! Thanks for your great ideas!

  4. Scott, very interesting article.

    I did notice that the Intuit information is only based on companies using QuickBooks Online and Online Payroll – what about all the companies that use the Desktop version of QuickBooks and either a do-it-yourself or Assisted payroll option?

    Without data from those who use the desktop version and do their own payroll – aren’t these findings a little (or a lot) off?

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