Small Business Optimism Continues to Rise

Small-Business Optimism Continues to RiseThe latest Wells Fargo/Gallup Small Business Index survey, conducted in April and released May 11, shows small-business owners’ optimism is on the rise-slowly but steadily.

Small-business owners in the survey had more favorable perceptions of their businesses’ current financial situation and cash flow than in the prior survey, conducted in January 2010. The overall optimism score was negative 11 (-11), which is a 5-point increase from January and a 10-point improvement from the survey’s all-time low of -21 in July 2009.

“As consumer and business spending appeared to pick up pace, this bolstered small-business owners’ optimism around their current situation,” says Dr. Scott Anderson, senior economist at Wells Fargo. “In our latest survey, we see more small-business owners describing their cash flows and current financial situation as good and higher percentages seeing an increase in revenues over the last 12 months.”

Overall, the survey has shown a slow but steady upward trend in the past three quarters.  However, says Anderson, “Business owners remain skeptical about the sustainability of this current upturn.”

The survey measures small businesses’ assessment of their current situation, as well as their expectations for how their business will perform over the next 12 months, on six key measures: financial situation, cash flow, revenues, capital allocation spending, hiring and availability of credit. A score of zero would show entrepreneurs are neutral-neither optimistic nor pessimistic-about their companies’ current financial situation and future outlook.

Respondents’ “present situation” improved seven points from negative 29 (-29) in January 2010 to negative 22 (-22). “Future expectations” declined slightly from 13 to 11.

Fifty-four percent described their company’s current financial situation as somewhat or very good-a big improvement from 48 percent in January 2010. Forty-two percent rated their cash flow in the past 12 months as somewhat or very good-an increase from 39 percent in January 2010.

The survey, which has been conducted for the past 28 quarters, measures responses of approximately 600 small-business owners nationwide.

Whenever I talk to audiences of small-business owners, I ask them how they’re feeling about the future. Until recently, despite the growing number of statistics and surveys showing the economy is on the mend, their responses have been uniformly pessimistic. In the past few weeks, however, I’ve started to hear from some entrepreneurs who are feeling positive about their prospects. How are you feeling about the economy?

Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.