Financial Situation Improves for Small Businesses, Future Remains Uncertain
Wells Fargo survey shows cash flow, revenue and access to credit getting
better for small businesses as expectations for year ahead remain flat
SAN FRANCISCO -- August 7, 2014
More small business owners say their company’s current financial situation is
good, yet their outlook for the next year has not changed significantly,
according to the latest Wells Fargo/Gallup Small Business Index.
In a quarterly small business survey, conducted July 7-11, the overall Small
Business Index score increased slightly to positive 49 (+49) in July, up two
points from positive 47 (+47) in April. The score, which measures small
business optimism, has increased six of the last seven quarters. Small
business optimism is now at its highest point in more than six years, however
it remains well below pre-recession levels.
The present situation – how business owners rate current conditions for their
businesses – is the main contributor to increased optimism in the latest
survey. The present situation score is now at a positive 18 (+18), up four
points since the April survey and 14 points from the same period a year ago.
Specific factors that contribute to the improvement include:
*Small business owners are feeling better about their current business
financial situation, with 62 percent rating it as very or somewhat good,
up from 57 percent in the second quarter 2014.
*More business owners report their company’s revenues have increased, with
43 percent indicating revenues are up in the past 12 months compared with
36 percent in April.
*Cash flow over the past 12 months also is at a six-year high. In the
survey, 55 percent of business owners report their cash flow has been very
or somewhat good over the past year, up from 50 percent in the second
quarter of 2014.
*Ease of obtaining credit in the past 12 months is up significantly – 32
percent of small business owners say that it has been very or somewhat
easy to obtain credit in the past 12 months.
At the same time, the future outlook for business owners in the July survey
was relatively unchanged, down two points to positive 31 (+31) from positive
33 (+33) in the second quarter. In three surveys conducted in 2014, the
percent of business owners who think their businesses’ cash flow, financial
situation and revenue would improve over the next 12 months has not moved
significantly. The percent of business owners who expect to increase capital
spending in the year ahead is the same as those who plan to decrease (25
“The latest Index scores show small businesses have made gradual progress
since the economic downturn –with modest improvement in the economy, healthier
small businesses are growing revenue and have stronger cash flow today,” said
Lisa Stevens, head of Small Business for Wells Fargo. “However, we know many
businesses still face challenges in the marketplace and it’s reflected in the
survey results. Many continue to wait for more improvement in their businesses
and the economy before they express confidence in the year ahead.”
Business owners report that the biggest challenge they face is attracting
customers and finding business (13 percent), followed closely by government
regulations (11 percent), financial stability of their business (11 percent)
and the economy (11 percent).
When it comes to generating new business, small business owners said the
toughest part is marketing and advertising (14 percent), and competition (13
percent). Ten percent of business owners said the costs of running a business
make it difficult to attract customers and grow. Another 10 percent said
making product improvements or having the latest products is the biggest
challenge to growing sales.
Small Business Use of Technology
In the latest Wells Fargo/Gallup Small Business Index, business owners were
asked about the impact and use of technology in their businesses, and their
responses show that many business owners are using mobile technology and
social media to run and market their businesses, and communicate with
Some of the key findings include:
*Website: Small business owners have become increasingly likely to report
having a business website – now at 59 percent compared to 54 percent in
*Personal computer/tablet: Nearly four in 10 use a tablet and about
one-third are using cloud-based computing software to run their
*Social media: Among all small business owners surveyed, social networking
sites are used in a variety of ways to help grow their business, including
connecting with customers (37 percent), marketing and promotion (34
percent), building an online reputation (34 percent) and advertising (33
*Online/mobile banking: Seventy-two percent of business owners use a
desktop or laptop to do their banking. And 40 percent use their mobile
device to conduct banking related to their small business. Among business
owners who use mobile banking, 44 percent said they use their
smartphone/tablet to monitor cash flow for their business; 16 percent use
it for mobile deposits; and 14 percent use it to pay bills. Those business
owners who don’t use mobile banking said their preference for doing
banking in person (40 percent) and security concerns (23 percent) were the
Small Business Index Key Drivers
Wells Fargo, together with Gallup, surveys small business owners quarterly
across the nation 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: Q2 2013 – Q3 2014
Overall Present Future
Index Situation Expectations
(surveyed July 49 18 31
(surveyed April 47 14 33
(surveyed 45 16 29
(surveyed 24 7 17
(surveyed July 25 4 21
(surveyed April 16 2 14
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 in all 50 United
States conducted July 7-11 2014. 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 positive 114 (+114) in the fourth quarter of 2006, and the lowest
reading was negative 28 (-28) in the third quarter of 2010.
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 (2002-2012 CRA government data). To help more small businesses
achieve financial success, in 2014 Wells Fargo introduced Wells Fargo Works
for Small Business^SM – 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.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.6 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 9,000 locations, 12,500 ATMs, and the internet
(wellsfargo.com), 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. 29 on Fortune’s 2014 rankings of
America’s largest corporations. Wells Fargo’s vision is to satisfy all our
customers’ financial needs and help them succeed financially.Wells Fargo
perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.
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.
Photos/Multimedia Gallery Available:
Wells Fargo & Company
Alice Hartnett, 704-715-9115
Jim Seitz, 612-316-2447
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