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Small Businesses Lack Faith in Economic Recovery

Entrepreneurs express fears economy will worsen, but faith in long-term outlook for small business.

Opinions expressed by Entrepreneur contributors are their own.

Entrepreneurs are not holding out hope for a quick economic recovery, according to several recent studies. One recent survey by Greenwich Associates, a Greenwich, Connecticut, institutional financial services consulting and research firm, indicates 18.8 percent of small businesses surveyed expect the economy to deteriorate over the next six months, while 47.4 percent expect no change.

This pessimism is leading many small businesses to spend less. According to the U.S. Census Bureau, businesses invested 4 percent less on capital goods like new equipment and structures in 2001. "Small-business owners feel more vulnerable to downturns in spending and thus spend less themselves," says Barbara Bird, chair of the management department at American University's Kogod School of Business in Washington, DC. "In some ways, they are caught in the middle of trickle-down--[where] big firms don't spend on purchases from smalls--and trickle-up, [where] consumers withhold spending due to fears of war, unemployment and lousy stock markets."

Still, although small businesses may be losing faith in the economy, they continue to show faith in themselves. A nationwide survey of 500 small-business owners and managers by QuickBooks saw 36 percent of respondents citing the economy as their top concern, yet the majority believe their businesses will survive.

"While the sluggish economy was a concern for some, the overwhelming optimism shows small businesses' confidence in their long-term outlook," says Allison Mnookin, business leader for QuickBooks, a small-business accounting software program from Mountain View, California-based Intuit Inc. "In fact, 87 percent believe that they will weather the sluggish economy and still be doing business in five years. More than half believe that they will be doing business in 10 years."