Small Business Index

Wells Fargo survey: Small business optimism up slightly in third quarter

Business owners report improved cash flow and access to credit, according to Wells Fargo/Gallup Small Business Index.

Published: August 04, 2016

SAN FRANCISCO, Aug. 4, 2016 – Small business optimism improved slightly in the latest Wells Fargo/Gallup Small Business Index, conducted July 6-12, yet overall it has remained relatively stable throughout 2016.

In the quarterly survey, which measures the optimism of small business owners, the overall Index score increased slightly to 68 in July from 64 in April. This represents the highest optimism reading since January 2015 following several quarters of incremental shifts. Small business owners also reported an increase in the ease of obtaining credit, with 36 percent saying that it was somewhat or very easy for their company to obtain credit over the past 12 months – the highest reading on this measure since the fourth quarter of 2008. While other measures saw minor incremental shifts, small business owners' rating of their company's cash flow over the past 12 months improved in July as 60 percent rated their company cash flow as very or somewhat good, compared to 55 percent last quarter. This measure has stayed reasonably consistent, hovering within an eight-point range since the first quarter of 2014 when it jumped from 46 to 52. 

"The latest Small Business Index score shows that while small business owners are more optimistic today than a year ago, many remain uncertain and cautious about what lies ahead," said Lisa Stevens, Wells Fargo's head of Small Business. "After several years of slow, gradual improvement in business owner perceptions of cash flow, revenue and financial situation, this trend seems to have plateaued. In this election year, business owners are reporting little change in most metrics, including their hiring and capital spending plans."

Small business owners and the 2016 presidential campaign

In the July survey, small business owners were asked follow-up questions to the April survey about the 2016 presidential election campaign. When asked how well they understand the candidates' positions on issues that would affect small businesses, 54 percent said extremely or very well, up slightly from 47 percent in the April survey. When it comes to the issues being discussed, 33 percent say they feel the candidates are discussing the issues most important to them as a small business owner, compared to 28 percent in April.

A majority of small business owners (57 percent) report following the election very closely. This a much higher percentage than the average American, according to a national survey of adults conducted by Gallup in mid-June, which found that only 40 percent of Americans were following the election very closely. Ninety-two percent of small business owners plan to vote in the November election, matching the responses found in April.

Small business payment trends

Small business owners also were asked about the types of payments their businesses accept, with check and cash being the top methods (90 and 72 percent, respectively.) Other top payment methods accepted include:

  • Mailed payment via printed check from a bill-pay service (53 percent)

  • Credit or debit card at point of sale terminal (42 percent)

  • Digitally, via Electronic Funds Transfer (42 percent)

  • Credit or debit card via a mobile point-of-sale terminal, such as Square Reader or PayPal Here (30 percent)

Similarly, when it comes to paying bills for their business, most small business owners pay by check, either in person or by mail (91 percent), by credit or debit card at a point of sale terminal (69 percent) or digitally via Electronic Funds Transfer (63 percent.)

In the July survey, business owners who currently use point-of-sale credit card systems also were asked about their acceptance of EMV chip-enabled cards. The survey found that a majority of these business owners (51 percent) now report that their systems are EMV chip-enabled, compared to 31 percent when the question was first asked a year ago and 48 percent when it was asked in January 2016.

Small business challenges

When business owners were asked to identify the most important challenges facing their business today, 14 percent cited attracting customers and finding new business as the top concern. Government regulations was the second most frequent mention at 12 percent, followed by the economy (12 percent), and hiring and retaining quality staff (11 percent). 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

Wells Fargo and Gallup survey small business owners across the nation each quarter to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring, and credit availability. The present situation score improved to 29 in July from 24 in April, while the future expectations score was relatively unchanged, decreasing one point to 39.

Wells Fargo/Gallup Small Business Index Scores: Q3 2015 – Q3 2016

  Overall Index Score Present Situation Future Expectations
Q3 2016 (surveyed July 2016) 68 29 39
Q2 2016 (surveyed April 2016) 64 24 40
Q1 2016 (surveyed January 2016) 67 26 41
Q4 2015 (surveyed November 2015) 54 21 33
Q3 2015 (surveyed July 2015) 59 23 36

 

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 July 6-12, 2016. 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. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 8,600 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries and territories to support customers who conduct business in the global economy. With approximately 268,000 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. Wells Fargo perspectives are also available at Wells Fargo Blogs and 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 (2002-2014 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 – and a goal to extend $100 billion in new lending to small businesses by 2018. 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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