The Best Economic Indicator for Small Business Owners

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These are boggling times for those who review study data about the economy, and about how small business owners feel about the economy. It seems as if a new study comes out daily, and that many of these studies contradict each other.

However, I've hit on one economic indicator that is likely going to be the most reliable guage of your particular business's prospects, as we slump slowly toward the end of 2010. Before we get to that, let's examine the recent data. 

From American Express OPEN Small Business Monitor, released yesterday, we learn optimism is dimming -- 45 percent of entrepreneurs have a positive outlook on the economy, down from 55 percent last fall. In the same study, though, the number of business owners looking to hire full-time workers doubled from 5 percent to 10 percent, and the proportion saying they plan to grow their business in the next six months went up as well. Fewer owners reported they had cash-flow worries.

Boggling, isn't it? That study seems to give mixed signals. And that's just one study!

Over at The Guardian Life Small Business Research Institute, recent data shows owners are considerably more optimistic than they were a year ago. The National Federation of Independent Business Owners, however, finds the level of owner optimism more or less flat. More owners reported to NFIB that they plan to cut staff.

But Discover Small Business Watch counters that idea, reporting that a three-month-long slide in business owners' confidence ended in September and is now on an upswing. However, the vast majority of owners -- 73 percent -- said they've put hiring on hold.

I could go on, but I think you get the idea. There are dozens of these studies, but these are among the longest-running and most highly regarded. And they seem to be pointing every which-way right now.

Which brings me back to trying to find the most effective economic indicator for small business owners. 

As I've talked to business owners around the country over the past two years, what sticks in my mind is how different their stories are, depending on where their business is located. A franchise restaurant owner in the south, for instance, told me about how he sold his property at a hefty profit recently, and that business continues to be strong. There wasn't much of a real-estate crash there, in part because values never went sky-high.

Up here in Washington State, the downturn was never as bad as in much of the country, and seems to be slowly percolating back to life now. In California, on the other hand, practically the whole place remains a business-climate disaster area, and the state is issuing IOUs.

My point is these national economic surveys aren't that useful, unless your business is national. If you're a local business, you can find your best economic indicator just behind your belly button.

It's your gut. Trust it to give you the one-person economic viewpoint that matters most.

Walk the streets of your town, and talk to other business owners. Talk to customers. Take a look at whether new shops are opening to fill those empty spaces. Analyze your recent business results to detect trends. The feeling you get in your gut about your local business climate as you do that is probably as accurate and helpful for your business planning as any survey you'll find.

What's your gut telling you about your local market? Leave a comment and let us know.
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