Wells Fargo Survey: Small Business Optimism Declines Amid Decreased Revenues

Survey highlights business preparedness for potential economic
downturn and key learnings since 2008 recession

SAN FRANCISCO–(BUSINESS WIRE)–Small business owners indicated declining optimism in the latest
quarterly Wells
Fargo/Gallup Small Business Index
, with an overall Index score of
106. That marks the seventh consecutive quarter in which the score has
topped 100, although it is 23 points lower than last quarter’s all-time
high of 129. The first quarter 2019 survey was conducted Jan. 9–15.

Along with a drop in the overall score, the number of business owners
who indicated optimism about their present financial situation dropped
to 46, down 13 points from the previous quarter. In addition, optimism
about their business’ future decreased 10 points to 60. This coincides
with decreasing company revenues, with 45 percent of owners saying
revenues increased (down 10 percentage points from last quarter) and 25
percent indicating a decrease (up 8 percentage points from the previous
quarter). Optimism about revenue in the next 12 months also fell, with 7
percentage points fewer business owners saying they expect revenue to
increase in 2019.

“Today’s business owners are very in tune with changes in the economy,
government policy and many other factors that can affect their
ventures,” said Andy Rowe, Wells Fargo head of Customer Segments. “They
are seeing these factors come into play and are predictably exercising
measured caution as they plan for the coming year.”

Business preparedness

The survey also asked how prepared business owners are for a future
economic downturn. More than three quarters (77 percent) said they were
somewhat prepared or very prepared for such an event, compared with 23
percent who said they were not very prepared or not at all prepared.
Also, when asked if 2019 would be a year of economic prosperity or
difficulty, 67 percent indicated prosperity, and 29 percent indicated
difficulty.

Proprietors who owned their businesses during the 2008 recession were
asked to compare their preparedness now to that point in time. The
number of owners saying they were more prepared now was 75 percent; 14
percent said they were less prepared. In addition, when asked what their
greatest lesson was in the decade since the 2008 recession, the most
frequent response was conservative capital management and frugality (19
percent). Other lessons included monitoring cash flow (12 percent) and
good planning (9 percent).

“With the various economic indicators we’ve seen, the decrease in
revenues and outside factors like the government shutdown, business
owners are predictably more cautious than in 2018,” said Mark Vitner,
Wells Fargo senior economist. “With that said, their responses around
preparedness and their continued sense that 2019 will be a prosperous
year economically indicate a sense of caution as opposed to a prediction
of an economic slump.”

Hiring and attracting new business highlighted as top challenges

For the fourth consecutive quarter, a high of 16 percent of business
owners indicated hiring and retaining staff is their top challenge;
attracting new business rose to nearly the same level as a top
challenge, with 15 percent citing it.

Other challenges cited include financial stability/cash flow (9 percent)
and taxes (8 percent), both of which continue to be top issues for small
business owners.

 

Wells Fargo/Gallup Small Business Index Scores: Q1 2018 – Q1
2019

   

Overall Index
Score

 

Present
Situation

 

Future
Expectations

Q1 2019 (surveyed January 2019)   106   46   60
Q4 2018 (surveyed November 2018)   129   59   70
Q3 2018 (surveyed July 2018)   118   52   66
Q2 2018 (surveyed April 2018)   106   45   61
Q1 2018 (surveyed January 2018)   107   42   65
     

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 January 9-15, 2019. 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 +129 in the fourth quarter of 2018, 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, investment and mortgage products and
services, as well as consumer and commercial finance, through 7,800
locations, more than 13,000 ATMs, the internet (wellsfargo.com) and
mobile banking, and has offices in 37 countries and territories to
support customers who conduct business in the global economy. With
approximately 259,000 team members, Wells Fargo serves one in three
households in the United States. Wells Fargo & Company was ranked No. 26
on Fortune’s 2018 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.

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.

Contacts

Manuel Venegas, 213-253-6531
manuel.venegas2@wellsfargo.com

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