Measuring the Economic Confidence of Small Business Owners
Reprinted from Discover Small Business Watch - April 2007
The Discover Small
Business Watch is a monthly index of the
economic confidence of the nation's 22 million
businesses with five or fewer employees.
Key Takeaways from the April Watch:
Economic confidence among small business owners
decreased in April, driven largely by a
deteriorating outlook on economic conditions for
their businesses, rising insecurity about the U.S.
economy and increased
cash-flow issues. The Watch
dropped from 117.7 in March to 110.3 in April,
marking the largest month-to-month decline since
the survey's inception nine months ago.
April Highlights:
- 32 percent of small business owners feel
that economic conditions for their business are
getting worse, up from 26 percent in March.
- Small business owners who said they have
encountered cash-flow issues over the past 90
days jumped to 40 percent, up from 33 percent
last month.
- 55 percent of small business owners feel
economic conditions in the country are getting
worse, compared to 51 percent in March. In
addition, 23 percent ranked the U.S. economy as
"poor," which is significantly higher than
March's "poor" rating of 16 percent.
- One bright spot in the April results is the
continued increase in business development
spending by small businesses. Forty-four percent
of owners plan to increase spending, which is
the highest percentage since the Watch began in
August.
Poll Finds Small Business Owners Unaffected
by Stock Market Changes
- 68 percent of respondents indicated that
changes in the stock market do not have a
noticeable impact on their business.
- 88 percent of small business owners said the
performance of the stock market "occasionally,
rarely or never" influences their business
investment decisions.
- 55 percent of small business owners
indicated that the stock market does not reflect
the economic reality they see around them on a
day-to-day basis.
Customer Insights for Investment Advisors
As part of Discover Business Card's continuing
effort to provide valuable customer insights to
key small business segments, this month's survey
polled consumers on the use of financial advisors.
- 43 percent of consumers said they found
their financial advisor through referrals from
friends or family. Only 12 percent of consumers
found advisors through free consultations and
seminars.
- The biggest advantage of having a paid
financial advisor is the expertise they bring to
making investment decisions, according to nearly
half of the respondents.
- The opportunity for financial advisors is
large: 44 percent of consumers who invest do not
use an advisor.
- 48 percent of investors believe that there
is as much free information available on the
Internet as there is available to paid advisors.
Research Methodology
The Discover Small Business Watch is
compiled each month by Rasmussen Reports, LLC, an
independent research firm, based on telephone
interviews and survey responses from approximately
1,000 small business owners and 4,000 potential
users of small business products and services.
The questions used to compile the Small
Business Watch are intended to determine small
business owners' relative confidence in general
economic conditions, business growth and business
spending. To calculate the Watch, a numeric
indicator has been created by adding data
positives, subtracting data negatives and then
dividing the total from the baseline month of
August 2006 to determine the relative Small
Business Watch value.
Factors including sampling, question wording,
survey design and overall methodology may impact
reported results.
- The margin of error for the sample involving
small business owners is approximately
+/- 3.2 percentage points with a 95 percent
level of confidence
- For the sample involving potential small
business users, the margin of sampling error is
+/- 1.6 percentage points with a 95 percent
level of confidence
The method for calculating the Small Business
Watch is subject to revision depending on data
tracking history and correlations with movements
in the U.S. economy.
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