Wells Fargo Small Business Survey: Hiring Remains Top Challenge
Optimistic small business owners plan more investments, despite uncertainty about impacts of tax reform
(SAN FRANCISCO – May 1, 2018) – Small business owners are overwhelmingly optimistic about the financial outlook of their businesses and the national economy, but many are facing challenges with hiring, in the latest quarterly Wells Fargo/Gallup Small Business Index, conducted April 2 – 6, 2018.
In the most recent survey, which measures small business optimism, the overall Index score was 106, almost unchanged from January when it was 107 ‒ its highest level in more than a decade. The current Index score was driven by high readings from small business owners on their financial situation and business revenues. Eighty percent of business owners said they are optimistic about the financial outlook of their businesses over the next 12 months, and 71 percent of business owners said their businesses had improved over the last year.
“Small business optimism and overall confidence in the economy remains high, largely due to an increase in sales and revenues, which suggest demand is strong,” said Mark Vitner, Wells Fargo managing director and senior economist. “We continue to see a large number of business owners struggle to find the workers they need, however, and that may ultimately squeeze profit margins.”
Challenges in hiring
A tight labor market is proving challenging for the 43 percent of survey respondents who said they plan to hire new employees in the next 12 months. Sixty-four percent said finding well-qualified employees will be a challenge for the growth of their business.
In addition, when asked to name their top challenge as a business owner, hiring and retaining qualified staff rose to the top of the list at 17 percent. This issue has been a pressing challenge for small business owners over the last year: Small business owners responding to the survey also listed hiring as their top challenge in July and October 2017 surveys.
Plans for the year ahead
Despite recent stock market volatility and difficulties in hiring, business owners also said they are confident the economy is headed in the right direction. Three-fourths of small business owners said the economy is on the right track for their businesses to grow, and 83 percent said their businesses are positioned to take advantage of a strong economy in the next year.
More than half (57 percent) said the national economy has improved over the last year, and about a quarter of business owners said their businesses had benefited a great deal from the improved national economy over the past year.
Small business owners’ positive view of the economy also may prompt increased investments in their businesses. Fifty-nine percent of small business owners said they are very likely or somewhat likely to provide salary or wage increases to their employees over the next 12 months, and 52 percent said they are very likely or somewhat likely to provide bonuses or other benefits to employees. Sixty-two percent said they are very likely or somewhat likely to purchase new equipment, and another 60 percent said they are very or somewhat likely to invest in new products or services to expand their businesses.
Tax reform impacts on small businesses
What’s less clear to small business owners, however, is how the American Tax Cuts and Jobs Act, passed in December, will impact their businesses. Thirty-nine percent said they still don’t know how the tax bill will affect their businesses, and 27 percent said they do not expect tax reform to benefit their businesses. Twelve percent of respondents said tax reform has already helped their businesses, and 21 percent said they expect it will benefit their businesses in the future.
Wells Fargo/Gallup Small Business Index Scores: Q2 2017 – Q2 2018
|Overall Index Score||Present Situation||Future Expectations|
|Q2 2018 (surveyed April 2018)||106||45||61|
|Q1 2018 (surveyed January 2018)||107||42||65|
|Q4 2017 (surveyed October 2017)||103||43||60||Q3 2017 (surveyed July 2017)||106||45||61|
|Q2 2017 (surveyed April 2017)||95||36||59|
About the Wells Fargo/Gallup Small Business Index
Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. Results are based on telephone interviews with 603 small business owners, with annual revenues up to $20 million, in all 50 United States conducted Jan. 3-9, 2018. The overall Small Business Index is computed using a formula that scores and sums the answers to 12 questions — six about the present situation and six about the future. An Index score of zero indicates that small business owners, as a group, are neutral – neither optimistic nor pessimistic – about their companies’ situations. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range. The margin of sampling error is +/- four percentage points. The highest Index reading was +114 in the fourth quarter of 2006, and the lowest reading was -28 in the third quarter of 2010.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investments, mortgage, and consumer and commercial finance through more than 8,300 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 42 countries and territories to support customers who conduct business in the global economy. With approximately 263,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.
Wells Fargo serves approximately 3 million small business owners across the United States and loans more money to America’s small businesses than any other bank (loans under $1 million, 2002-2016 Community Reinvestment Act government data). To help more small businesses achieve financial success, Wells Fargo introduced Wells Fargo Works for Small Business® – a broad initiative to deliver resources, guidance and services for business owners. For more information about Wells Fargo Works for Small Business, visit: WellsFargoWorks.com. Follow us on Twitter @WellsFargoWorks.
For more than 70 years, Gallup has been a recognized leader in the measurement and analysis of people’s attitudes, opinions and behavior. While best known for the Gallup Poll, founded in 1935, Gallup’s current activities consist largely of providing marketing and management research, advisory services and education to the world’s largest corporations and institutions.