Small Business Index

Wells Fargo survey: Small business optimism holds steady in second quarter

Small business owners share their insights on hiring plans and on-demand labor in the Wells Fargo/Gallup Small Business Index.

Published: May 04, 2017

SAN FRANCISCO, May 4, 2017 – Small business optimism held onto recent gains in the second quarter, according to the latest findings from the Wells Fargo/Gallup Small Business Index, conducted April 3-7.

In the quarterly survey, which measures the optimism of small business owners, the overall Index score was 95 in April, down from 100 in February when business owners reported being the most optimistic since the start of the Great Recession. The drop is not statistically significant, and small business optimism is still up significantly from a year ago when the Index score was 64, as business owners continue to report improvement across most survey measures.

Many of the key metrics this quarter were almost unchanged from the first-quarter survey. These included:

  • Strong financial situation – Seventy-three percent said their current financial situation is very or somewhat good, up slightly from 71 percent in February

  • Healthy revenues – Almost half (46 percent) said their business's revenue increased a little or a lot over the past 12 months, nearly the same as in February when it was 45 percent

  • Steady cash flow – Six in 10 (63 percent) said that their cash flow was very or somewhat good over the past 12 months, down one point from 64 percent in February

  • Access to credit – Thirty-nine percent said that credit was somewhat or easy to obtain over the past 12 months, about the same as February when it was 40 percent

"It's encouraging to see that for many small business owners 2017 is off to a great start, and they remain optimistic and continue to express confidence in the outlook for their businesses," said Lisa Stevens, Wells Fargo head of Small Business. "Our latest survey shows us that more small business owners report plans to hire more employees, increase their capital spending and apply for new credit products in the year ahead. This is consistent with what our bankers are hearing from small business customers today. As the economy has improved over several years, more and more business owners have healthier finances and are ready to take steps to position their businesses for the long-term."

Small business hiring

Small business owners were asked about their hiring plans and challenges in the April survey. Looking ahead, about a third (31 percent) say they expect the number of jobs or positions at their company to increase over the next year. Despite their plans to hire, small business owners reported several challenges when it comes to finding new staff. More than half of those surveyed (52 percent) say that finding qualified people to apply for jobs at their businesses is a top challenge. Other reported hiring challenges included:

  • Difficulty knowing how well an applicant will do when hired (43 percent)

  • Candidates applying for jobs at their business are either over or underqualified for the position (32 percent)

  • Business owners do not have the time and resources to devote to finding the best candidates (32 percent)

"Like many other businesses in the service industry, we have found it difficult over the past few years to hire qualified employees," said Alison Neumann-Lundy, owner of Minneapolis-based residential cleaning service Alison's Cleaning. "To entice new hires, we work very hard to provide an attractive work environment by offering flexible schedules, competitive wages and benefits including paid time off."

Small business owners also were asked about the rising popularity of companies that provide on-demand businesses and services, which involves using the internet and smart phone apps to assign work to people who are not regular employees, but are available to do tasks on an on-demand basis or as needed. Just 18 percent of those surveyed describe their business as a provider of on-demand goods and services, yet one in four (26 percent) believe the trend toward more on-demand labor will benefit their business in the long run. Another 20 percent say their business currently faces competition from on-demand companies, and another 27 percent expect to experience this competition in the future.

Small business challenges

When business owners were asked to identify the most important challenges facing their business today, attracting customers and finding new business rose to the top of the list at 13 percent, followed by hiring and retaining quality staff (11 percent) and the economy (10 percent). Government regulations also was listed as a top challenge at 9 percent, down from 14 percent last quarter. These challenges have been consistently reported as the top concerns of small business owners since early 2013, although the order of concerns shifts from quarter to quarter. 

Small Business Index key drivers

In April, the present situation score – how business owners gauge their perceptions of the past 12 months – dipped to 36 from 40 in February, when it was the highest it had been since January 2008. The future expectations score – how business owners expect their businesses to perform over the next 12 months – remained relatively unchanged at 59. 

Wells Fargo/Gallup Small Business Index Scores: Q2 2016 – Q2 2017

 

Overall Index Score

Present Situation Future Expectations

Q2 2017 (surveyed April 2017)

95

36

59

Q1 2017 (surveyed February 2017)

100 40 60

Q4 2016 (surveyed November 2016)

80 24 56

Q3 2016 (surveyed July 2016)

68 29 39

Q2 2016 (surveyed April 2016)

64 24 40



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 April 3-7, 2017. 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 $2.0 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,500 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 273,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 27 on Fortune's 2016 rankings of America's largest corporations. Wells Fargo's vision is to satisfy our customers' financial needs and help them succeed financially. 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 (2002-2015 CRA government data). To help more small businesses achieve financial success, in 2014 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.

About Gallup

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.  

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