Small Business Owners Growing Less Optimistic

Small business owners have been getting a lot of mixed signals in recent months about their ability to improve the reach of their companies, and now the ups and downs seem to finally be creating something of a drag on optimism that they'll be able to make certain decisions in the future.

The amount of small business optimism took a bit of a hit through the end of June, falling 0.9 points to a rating of 93.5, and is still well below levels observed prior to the recession, according to the latest Small Business Optimism Index from the National Federation of Independent Business. In all, the current level is 12 points higher than the trough seen in the depths of the recession, but remains seven points below the pre-2008 average, as well as 14 points below the all-time high.

The index itself is made up of 10 individual measures, of which just two (plans to increase employment and expectations of economic improvement) ticked up even slightly. Six more saw declines, some of them appreciable; for instance, there was a four-point declines in plans to increase inventories, while 3 percent apiece expect higher sales and have optimism about their current inventories.

"After two months of incremental but solid gains, the Index gave up in June," said NFIB chief economist Bill Dunkelberg. "This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about. Washington remains bogged down in scandals and confidence in government's ability to deal with our fundamental problems remains low. Economic growth was revised down for the first quarter of the year and the outlook for the second quarter is not looking good.

What are small business owners worried about?
Meanwhile, taxes, as well as government requirements or red tape weigh most heavily on 20 percent of small business owners nation, another 18 percent are worried about poor sales first and foremost, the report said. However, it should be noted that there was actually a decline in issues with taxes and poor sales overall, of 1 and 3 percent, respectively, on an annual basis.

"Nothing cheers up a small-business owner more than a customer, and they remain scarce and cautious while consumer spending remains weak and more owners are reporting negative sales trends than positive ones," Dunkelberg added. "It certainly doesn't help that the endless stream of delays and capitulations of certain provisions of the healthcare law adds to the uncertainty felt by owners. Until growth returns to the small-business half of the economy, it will be hard to generate meaningful economic growth and job creation."

There has also been a significant amount of worry among some small business owners, related to red tape, as a result of the recent decision to delay the small business health insurance requirement for all employees working more than 30 hours per week. Originally, this plan was supposed to be in place by the start of next year, at the same time as the individual coverage mandate. However, the delay will push that back to January 1, 2015, which has some small business owners who might have been making significant preparations for the rule to go into effect somewhat perplexed as to what to do going forward; some could delay those plans for a year, and others might choose to forge ahead despite the lack of a legal requirement.

This may also present some owners with the ability to review their other small business insurance policies, including those for general liability insurance, as they may be able to save some money on them by shopping around, and thus improve their bottom lines.