By Fayazuddin A. Shirazi
Small business owners are apparently confident of an early economic revival. At least three small business owners’ surveys have indicated that a sizeable number of small businesses feel American economy will moderately improve by the end of this year.
According to the Small Business Outlook survey of over 800 small business owners by PartnerUp, a Minneapolis based social networking community focusing on small businesses, 37 percent of the survey respondents believed U.S economy will revive at least to some extent by the end of 2009. The survey also found that small business owners expect to invest more in their businesses, with 68 percent of them planning to hire new employees in the next six months.
At the same time, the study revealed small business owners are taking measures to offset the economy’s impact with 10 percent of the survey respondents planning a workforce reduction, 32 percent are reducing unnecessary costs and 25 percent are lowering business travel and entertainment spending.
“Even in the current economic climate, the majority of small business owners are cautiously optimistic and confident,” said Brian Kennett, Director of Community at PartnerUp in a media release. “The results of this survey show that small business owners are taking proactive steps to weather the continuing economic downturn, while simultaneously preparing for the impending economic recovery.”
“Small businesses are a critical component of our nation`s economy, contributing to the creation of 70 percent of the economy`s new jobs,” said Steve Nielsen, CEO of PartnerUp. “These findings indicate that small business conditions are beginning to stabilize, but that small business owners still face significant challenges before the economy fully recovers.
Additionally, the National Federation of Independent Business, an association of independent businesses with less than 250 employees, also said its index of business owner optimism rose 2.1 points to 88.6 in August, an increase that NFIB chief economist William Dunkelberg called “a big gain.” The optimism, though, is about the future, as owners still have a dim view of current economic conditions.
According to experts, the gain was primarily a result of improved expectations for future business conditions and real sales volumes. The gain in the NFIB Optimism Index clearly signals that the worst is likely over, but so far there has been no “surge” in sentiment or in the important Index components directly tied to the Gross Domestic Product.
“Owners are feeling a bit more confident now because the economy is healing itself and is bottoming, so there are certainly few signs of improvement. Besides, stock market news is also helpful as it indicates growing optimism among investors and business owners alike,” William Dunkelberg told CE Online.
Meantime, a recent survey by Discover Small Business Watch also revealed a similar sentiment among small business owners. The small business watch, a monthly index of the economic confidence of the nation’s 22 million businesses with 5 or fewer employees, also said small business confidence rose to highest level in 18 Months.
According to the Discover survey small business owners expressed faith that the U.S. economy is on the rise and gave signs that they are more willing to invest in advertising and new inventory now than before. The index rose to 89.8, up 7.7 points from July and the highest level since 90.9 in February 2008.
“For the past few months, small business owners have shown rising confidence in the overall economy, as well as an increasing sense that the conditions for their own businesses are improving,” said Ryan Scully, director of Discover’s business credit card. “This month we have a few more signs that they may be ready to start trying to grow their businesses again, and that the worst may be over.”
The number of small business owners who think the economy is getting worse dropped to 43 percent in August, the lowest reading on that data point since the Watch`s inception exactly three years ago, a media release said. This month, 38 percent of owners say the economy is getting better, up from 30 percent in July; 15 percent believe that the economy is staying the same, down from 16 percent in July; and 4 percent remain unsure.
The juxtaposition between the increased optimism and the muffled plans for spending and hiring is because of the non-availability of credit, experts point out. According to a recent survey difficulty in getting credit is a dampener on spending and hiring for most of the businesses.
The recently released Duke University/CFO Magazine Global Business Outlook Survey revealed that credit problems remain with 56 percent of U.S. firms reporting they are adversely affected by credit market conditions, with higher borrowing costs being the biggest problem.
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