Small business optimism continues to rise with the majority of business owners reporting increased sales and improved business conditions since earlier this year, according to Capital One’s latest Small Business Growth Index, which surveyed 500 small business owners in August.
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CapitalOne Spark IQ Business blog.
In fact, 60% of small business owners (SBOs) feel current business conditions are good or excellent. Moreover, Capital One’s Small Business Confidence Score tracking overall small business sentiment on the economy, hiring plans, future financial positions and recent sales, has reached its highest point since 2012.
Could this increase in positive sentiment among small business owners indicate that confidence will continue into 2018? Possibly. While the survey results point to high confidence and a positive small business outlook, they also show business owners facing challenges and concerns about legislative topics. Taken together, the data paints a picture of what will be top of mind for business owners next year.
Strong Finances Influence Positivity
The bottom line usually plays an important role in how a business owner feels about the state of their business. Many surveyed said their finances are in good shape. Thirty-seven percent reported they are in a better financial position than they were a year ago, an increase of six points from February.
Additionally, almost half (47%) reported their businesses have increased sales in the past six months—up 10 points from the spring survey—and the highest percentage recorded since the second quarter of 2013. More male business owners (51%) reported increased sales in the past six months, compared to their female counterparts (41%).
Strong financial results certainly indicate a trend in positive sentiment for the state of small business. While the bottom line may be strong, key challenges among small business owners indicate a story of concerns that parallel the positive.
Small Business Challenges Persist
Although business owners report growing optimism, a number of challenges remain top of mind. Forty-five percent of respondents said taxes are a top concern affecting their business. As federal lawmakers promise to push through a major overhaul of the tax code, the uncertainty about how it will play out is likely to remain a concern well into 2018 as business owners wait to see if their tax rates will decrease, increase or remain about the same.
The second biggest concern among small business owners is cash flow management. Forty-two percent of respondents listed it as a top challenge, an increase of 11% from this time last year. While cash flow management is a consistent concern for business owners, the jump in respondents could be an indication that despite having a strong bottom line, there is insecurity on how to keep it strong.
Business owners are also concerned about keeping up with technology—32% said it was a top challenge. This is an increase of seven points in the past year. As new technologies develop, cybersecurity threats continue and more business is conducted online, it can be difficult for small businesses to feel like they’re staying on top of technology. This could be a reason why many small businesses stay away from even basic technology—more than a third (36%) don’t have a website and nearly half (48%) do not use social media (Facebook, Twitter, LinkedIn) to grow their business.
Impacts of Legislation on Business Forecast
In addition to operational challenges, business owners also indicated legislative changes impact the way they feel about business conditions. With a new administration in the White House, business owners are experiencing changes such as a reduction in federal and state regulations. Twenty-four percent say the decrease has had a positive impact on growth.
At the same time, 30% of business owners say tax rates and laws have had a negative impact on their businesses. With potential tax reform on the horizon, business owners may experience changing tax realities in the coming months or years.
Another legislative change—minimum wage increase—is impacting fewer business owners across the country. Last year, 21% of business owners were concerned about the minimum wage increase, but fewer business owners seem to believe the wage increase will have an impact on their businesses, as only 17% mentioned it as a concern. That being said, only 25 percent of businesses plan to hire in the next six months – down two points from earlier this year. While minimum wage is not a top concern the majority of businesses, it could be impacting hiring plans.
While this is just a peek at the small business outlook, right now it seems as though small business optimism may surpasses the challenges and legislative uncertainty facing business owners.
As they look forward to 2018 business owners say they will put effort into areas they think will improve their business. The efforts most cited as promising include: increasing advertising and marketing efforts (18%) and hiring new staff (18%).
Whether business owners make these efforts next year could indicate a more solid sense of the sentiment for small business for 2018. For now, optimism remains high.
Capital One’s Small Business Growth Index surveyed 500 small business owners across the US in August 2017.
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