Despite heavy headwinds, small-business owners report being more optimistic about their business prospects than they were several months ago, according to two reports published today.
Eighty-four percent of business owners with companies under a year old say they are confident or very confident in their companies' prospects for profitability in the next 12 months, according to a first-quarter report by the Ewing Marion Kauffman Foundation and LegalZoom that surveyed 1,650 startup founders in February. This is the highest level since the quarterly confidence survey launched in early 2012, and reflects an increase of 1 percent since the fourth quarter of last year.
Meanwhile, a survey by Wells Fargo and Gallup also showed a slight increase in optimism among 603 small-business owners with up to $20 million in revenue. The quarterly index measures the owners' outlook on company finances, hiring and credit availability. It rose seven points in April from January, boosted primarily by improvement in company cash flow.
To be sure, entrepreneurs tend to be an optimistic bunch, and they also acknowledge remaining challenges. One-in-five of the Wells Fargo respondents cited attracting customers and new business as the most important challenge facing them today. Government regulation was the second most common concern, followed by the weak economy, taxes and health care.
"Business owners are opening their eyes to new opportunities, and they see that the road ahead looks somewhat better," says Doug Case, a senior vice president and small-business segment manager at Wells Fargo. "While it's better than it has been, there's still a sense of caution looking forward."
Despite being optimistic about their own companies' profits in the year ahead, entrepreneurs' faith in U.S. economic growth weakened from the fourth quarter of 2012, according to the Kauffman study. Just 39 percent said they expected the economy to improve over the next 12 months, compared to 44 percent in the previous quarter.
Meanwhile, the hiring picture seems to be getting bleaker among early-stage companies, the Kauffman data suggests. In the fourth quarter of last year, 37 percent of the respondents planned to hire. In the most recent survey, only 32 percent expected to hire more employees in the next 12 months.