Small business owners still have lingering concerns about their future financial situation, according to a July Wells Fargo/Gallup small business survey.
The number of business owners expecting to be in a good financial position during the next 12 months declined 7 percentage points to 59 percent; those expecting increased revenues in the next 12 months declined by 6 percentage points to 43 percent.
Despite the decline in the index score this quarter, business owner optimism has improved significantly from the recession low point when the index dipped to -28 in the third quarter of 2010.
This quarter’s survey also included questions to gauge business owner attitudes about capital spending.
Fifty-three percent of business owners say they have made capital investments during the past 12 months, with the majority — 70 percent — purchasing new equipment or machinery. A smaller percentage of business owners – 41 percent – say they plan to make capital investments in the next 12 months. The number one reason cited for not making an investment was concern about the overall state of the economy.
“Business owners have a lot of unknowns in front of them today,” said Doug Case, Wells Fargo small business segment manager. “This is the first drop in the index this year and it seems to correlate to the lower percentage of business owners planning to invest in their companies in the year ahead.”
In the survey, businesses said they’ll be more likely to invest in their businesses when they see improvements in their operating environment, better sales and revenue, Case said.
Small business owners planning to make capital investments during the next 12 months say they intend to make them in new equipment/machinery and technology, such as computers, new software or websites and mobile devices. This reflects the growing importance of having up-to-date technology to conduct business, Case said.
Lower expectations for increased revenues in the next 12 months may be problematic for small business owners who plan to fund capital expenditures primarily with business revenue and profits rather than relying on credit or savings, the Wells Fargo report said.
Business owners who said they plan to make a capital investment during the next 12 months say they are planning to pay for it using business revenue, credit, savings or investors.