Wells Fargo survey: Small businesses enter 2016 with more optimism
Improved cash flow and future outlook boost latest Wells Fargo/Gallup Small Business Index.
SAN FRANCISCO, Feb. 16, 2016 — Small business owners expressed a level of optimism not seen in a year in the latest Wells Fargo/Gallup Small Business Index, conducted January 11-15, as the Index's overall score rose to 67, a 13-point gain from November's survey.
The quarterly survey, which measures the optimism of small business owners, had previously declined for three consecutive quarters, falling to an overall score of 54 in November. The January increase was the largest quarter-over-quarter increase since January 2015, when the Index also rose 13 points.
The bounce in optimism benefitted largely from small business owners feeling better about their cash flow, with 60 percent saying their cash flow was very or somewhat good over the past 12 months — a level not seen since the fourth quarter of 2007. Looking ahead, 66 percent of business owners expect their cash flow to be very or somewhat good in the next 12 months, compared to 63 percent in November. Most other Index measures had small increases or were unchanged in the first-quarter survey.
"The latest Index scores show that small business owners are more upbeat about their current and future business conditions," said Lisa Stevens, Wells Fargo's head of small business. "Similar to what we've seen in some consumer confidence surveys, improvements reported in the January survey indicate the optimism of small business owners rebounded after trending downward for much of 2015. This suggests small business owners are entering 2016 with greater confidence."
Also boosting the January Index score was the forward-looking outlook of business owners. Small business owners reported feeling more positive about the next 12 months, as the survey's future expectations score rose eight points to 41 in January from November's score of 33. The present situation score — how business owners rate current conditions for their business — also improved, climbing five points to 26 in January from November's score of 21.
Small business payment trends
The Index also gauged small business owners' attitudes about EMV chip-enabled debit and credit cards. Beginning Oct. 1, 2015, merchants needed to convert to new EMV-enabled card processing systems or accept liability for any fraudulent point-of-sale card transactions. To meet the October 1 deadline, merchants were encouraged to update their card processing systems to accept chip-enabled cards. Almost half (48 percent) of business owners surveyed in January said that their card processing system is currently chip-enabled, up from 31 percent in August 2015. One business that recently updated their card processing system to accept chip-enabled credit and debit cards is Mango Salon, a Richmond, Va.-based hair and nail salon.
"We decided to upgrade to the new technology ahead of the requirements kicking in, not only to protect our business, but also to gain the confidence of our guests, who pay primarily via credit or debit cards," said Jamie-Lynn Mitchell, Vice President of Finance and Planning for Mango Salon. "Since upgrading our card processing system in September, we are now able to offer our guests digital wallet payments, such as Apple Pay, in addition to chip cards."
Of the business owners who have not updated their card processing system to accept chip-enabled cards, 22 percent plan to do so in the next six months, and 14 percent say within the next 12 months. One in five business owners (20 percent) say they never plan to upgrade.
Business owners were surveyed on the types of payments they accept from their customers with the top method being cash or check (84 percent), followed by in-person via credit or debit card at a traditional point-of-sale terminal (31 percent) and in-person via credit or debit card at a mobile point-of-sale terminal (20 percent). Business owners also reported accepting payments through their website by a variety of methods, including online payment providers (21 percent) and via credit or debit card (20 percent).
While just five percent of business owners stated they accept payments in person via a digital wallet such as Apple Pay™ or Android Pay™, more plan to do so in the future with 11 percent saying they intend to accept payments via digital wallets in the next 12 months.
Small business technology
Also in the January survey, business owners were asked about their use of technology, including their mobile banking habits. More than half (51 percent) said they use a mobile device to conduct banking related to their business. When asked which mobile banking activity they use most often on their smartphone or tablet, business owners said:
Staying on top of cash flow for their business (e.g. checking balances) (38 percent)
Mobile deposits (21 percent)
Paying bills (13 percent)
Transferring funds (12 percent)
Monitoring for out-of-pattern transactions or fraud (12 percent)
Business owner challenges
When business owners were asked to identify the most important challenge facing their business, 14 percent cited attracting customers and finding new business as the top concern. Other top concerns included the economy (11 percent), hiring and retaining quality staff (11 percent), and government regulations (9 percent). These challenges have been consistently reported as 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.
Wells Fargo/Gallup Small Business Index Scores: Q1 2015 – Q1 2016
|Overall Index Score||Present Situation||Future Expectations|
|Q1 2016 (surveyed January 2016)||67||26||41|
|Q4 2015 (surveyed November 2015)||54||21||33|
|Q3 2015 (surveyed July 2015)||59||23||36|
|Q2 2015 (surveyed April 2015)||64||24||40|
|Q1 2015 (surveyed January 2015)||71||28||43|
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 600 small business owners, with annual revenues up to $20 million, in all 50 United States conducted January 11-15, 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 $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 30 on Fortune's 2015 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.
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.