Small Business Owners Feel Slightly Better in July

In the past several months, optimism among small business owners on a number of topics has waxed and waned, but during July, it seems there was a slight improvement in sentiment across several issues.

The feeling among small businesses when it comes to plans to increase employment, obtain higher sales numbers, increase inventory, open more jobs, chances for expansion and trends in earnings ticked up marginally in the month of July, bringing total small business optimism to a rating of 94.1, an increase from 93.5 in June, according to the latest Small Business Optimism Index from the National Federation of Independent Business. A reading of less than 100 indicates that feelings overall may still be somewhat negative. In all, the NFIB tracks 10 different factors in coming up with its index, and of that number, only two (expectation for the economy to improve and expected credit conditions) declined in July. Six more increased, and two (plans to make capital outlays and plans to increase inventories) recorded no change.

"In an attempt to 'make lemonade' from the lousy bushel of lemons the administration has handed the small-business community, owners gave the July optimism Index the great distinction of being the fourth highest reading since December 2007 – when the economy slipped into official recession," said NFIB chief economist Bill Dunkelberg. "But let's not get too excited: The level is still well below the average reading of 100 in the prior 35 years and still half a point below the December 2007 reading."

So what do owners see as problems?
Dunkelberg added that many small business owners are still concerned about healthcare costs that may be set to increase under the Affordable Care Act, complexity in determining tax liability, rising energy costs and other issues related to the economy, the report said. Further, the delay in implementing the business side of the ACA could cause considerable problems for owners both now and in the future, when the mandate for covering all workers at businesses with 50 or more full-time employees.

There were three major problems generally reported by small business owners in July, the report said. The two largest, accounting for 21 percent of responses each, were taxes and government requirements and red tape, which have held more or less steady on an annual basis, but are both down considerably from survey highs of 32 and 27 percent, respectively. Rounding out the top three was concern over poor sales, which 16 percent of responding owners cited as their biggest problem last month. That was down from 20 percent who responded the same way a year ago, as well as the all-time peak of 33 percent. Of the seven remaining major complaints, none cracked double digits in terms of the percentage of respondents.

Further, 12 percent of employers reduced the size of their workforces over the past few months, by an average of 2.6 employees, the report said. Only 9 percent added any workers, at an average of 2.9 people, and that number was down from the 11 percent observed in June.

Independent company owners across the country may, as a result of these current feelings, now be looking for new ways to make their companies work successfully, and that could potentially include finding more affordable small business insurance options. Reducing costs for workers' compensation or general liability insurance may end up helping businesses to become a little more flexible when making financial decisions, and potentially free up enough money to start feeling better about the companies' chances for success in the relatively new future.