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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.

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Entrepreneurs are not holding out hope for a quick economicrecovery, according to several recent studies. One recent survey byGreenwich Associates, a Greenwich, Connecticut, institutionalfinancial services consulting and research firm, indicates 18.8percent of small businesses surveyed expect the economy todeteriorate over the next six months, while 47.4 percent expect nochange.

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

Still, although small businesses may be losing faith in theeconomy, they continue to show faith in themselves. A nationwidesurvey of 500 small-business owners and managers by QuickBooks saw36 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, theoverwhelming optimism shows small businesses' confidence intheir long-term outlook," says Allison Mnookin, businessleader for QuickBooks, a small-business accounting software programfrom Mountain View, California-based Intuit Inc. "In fact, 87percent believe that they will weather the sluggish economy andstill be doing business in five years. More than half believe thatthey will be doing business in 10 years."

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