Small Business Confidence Rises as Cash Flow Issues Decline

June 2009

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Economic confidence among small business owners rose slightly in June as cash flow concerns abated and the mood on the economy held steady. The monthly index rose to 80.9, up from 78.1 in May.

Learn more about the research methodology for the Small Business Watch.

June Highlights:

• 42 percent of small business owners say they have experienced temporary cash flow issues in the past 90 days, down from May's record high of 49 percent.
• 26 percent believe economic conditions are improving, up from 23 percent in May, while 57 percent believe conditions are getting worse, which is unchanged from the previous month; 14 percent said the economy is staying the same, and 4 percent weren't sure.
• 59 percent of small business operators rate the economy as poor, down 1 percent from May, while 8 percent rate the economy as excellent or good, and 30 percent called it fair.
• 49 percent of owners see economic conditions for their businesses getting worse, up 1 percentage point from May; 25 percent see conditions improving, also up 1 percentage point; 22 percent say conditions are the same; and 4 percent weren't sure.
• 51 percent of small business owners say they plan to decrease spending on business development over the next six months, down from 53 percent in May; 22 percent plan to increase spending, and 24 percent are not planning any spending changes.

Poll: Economy May Be Dampening Independent Spirit

• 36 percent said they are willing to walk away from their own business to earn more money working for someone else – a jump from 30 percent last year.
• When asked the main reasons why people start their own businesses:
  -- 24 percent say they started a business to have more flexibility with their time, down from 29 percent in June 2008.
  -- 22 percent cited the ability to be their own boss.
  -- 15 percent said they wanted a feeling of accomplishment, up from 11 percent last year.
  -- 12 percent started their own businesses to make more money.
  -- 10 percent cited needing a job, up from 7 percent last year.
  -- 14 percent answered "Some other reason" when asked why they started their businesses.
• When asked about the most challenging aspect of owning a business:
  -- 40 percent chose finding new business, up significantly from 31 percent in June 2008 and 28 percent in June 2007.
  -- 23 percent cited government rules and regulations, up from 13 percent in 2008.
  -- 11 percent said managing cash flow, a noticeable drop from 19 percent in 2008 and 21 percent in 2007.
  -- 7 percent said employing good people.
  -- 4 percent said managing insurance costs.
  -- 11 percent answered "Some other aspect" and 5 percent weren’t sure.
• The source of financial capital for starting their businesses is largely unchanged over the past three years:
  -- 45 percent said they used personal savings followed by:
  -- 19 percent, bank loans
  -- 16 percent, funding from family and friends
  -- 8 percent, credit cards
  -- 4 percent, second mortgage or equity loan
  -- 8 percent answered "Some other way."

Small Business Owners Split on Universal Healthcare Coverage

• 78 percent of small business owners said they do not offer health insurance to employees.
• 48 percent of them said the country does not need a government-run universal healthcare option, 45 percent said it does and 7 percent weren't sure.
• Of those who offer health insurance, 62 percent said a government mandate to either provide insurance or pay a fee would have a negative impact on their businesses; 16 percent said the effect would be positive; 11 percent said it would have no impact; and 3 percent weren't sure.

The Discover Small Business Watch is a monthly index of the economic confidence of the nation's 22 million businesses with 5 or fewer employees. Learn about our small business research methodology.