Optimism among small business owners has been steadily improving for some time now, and this trend continued through the end of the first quarter despite the fact that many owners are still somewhat concerned about certain economic issues.
There was some improvement in the feeling small business owners have with regard to their companies' short-term futures through the end of the first three months of the year, according to the latest Wells Fargo/Gallup Small Business Index. In all, the index improved seven points over the course of the quarter to positive-16, up from the positive-9 observed at the start of the new year, and negative-11 from last November. However, the index is still down from the same level a year prior, when it reached the third-highest mark observed since July 2008, at positive-23.
This positive feeling was generally driven by companies having more cash flow, as nearly half said theirs was either very or somewhat good in the last 12 months, up from slightly more than four in 10 in the previous poll, and the highest level observed since the first quarter of 2009, the report said. In addition, more owners – 53 percent – also expected their cash flow to be better.
"While we are seeing measured signs of recovery and businesses in general continue to improve their balance sheets, small business owners are still uncertain about the future," said Marc Bernstein, Wells Fargo head of Small Business. "Small business owners, who now have stronger cash flow than at any time since the start of the Great Recession, tell us they're focused on generating more steady sales, and many are holding off making investments in their business until that happens."
In fact, 21 percent of owners polled said that their biggest issues these days involve attracting customers and new business, the report said. That was more than double the second-largest concern they mentioned – government regulations – at 10 percent, the weak economy and taxes at 9 percent, and healthcare at 8 percent. Only 4 percent of those polled said that a lack of available credit was their most significant issue.
How small businesses are handling credit in general
Credit has been an issue in many areas in the time since the end of the recession, but it doesn't seem to be affecting small businesses quite so much, the report said. Today, more than six in 10 small business owners say they're perfectly comfortable with their debt loads, though another 37 percent say they are not, and the number of companies who say they've never relied on credit is up to nearly one-third, from slightly less than a quarter a year earlier.
Of course, small business owners likely have a lot more to think about these days with the economy slowly improving and their prospects for expanding their operations likely doing the same. The chance to bring in more cash could in turn lead to a desire to increase hiring that might have been discontinued for even a few years after the end of the recession, but that in turn comes with a number of issues of its own.
For one thing, owners now have to think about the way more employees will affect their costs related to health insurance plans, particularly if these efforts bring them to more than 50 full-time workers. Moreover, adding people will likely lead to other small business insurance needs including increased bills for liability insurance and workers' compensation insurance. These policies can grow quite costly, and it is therefore wise to seek the best deals on them as possible, through extensive research.