National Small Business Week: How Are They Doing?

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National Small Business Week: How Are They Doing?

Is it possible, or even fair, to generalize about the “state” of all small businesses? That’s the question usually lurking behind this column’s periodic reviews of small business surveys and data. In one sense, attempts at such generalizations are dubious: the small business population is simply too vast and diverse to make sweeping statements about it based on small-sample surveys.

On the other, many of those surveys are quite good and long-running, which provides consistency. And, there are some recent entrants to the field that are fairly large in their sample size and sophisticated in methodology.

Unfortunately, the answer these surveys and datasets suggest to the question of how small businesses are doing is: things are all over the place.

Good News: Present Performance, Future Expectations

Overall, at least compared to the worst years and months of the pandemic, small business performance has improved and appears somewhat stable. In the Census Bureau’s relatively new Business Trends and Outlook Survey (BTOS), most small business owners appear to say that things are steady. The shares of those reporting either an increase or decrease in recent performance or revenue haven’t changed much. In fact, there has been an increase in those saying their performance is “average.” Not exactly the stuff of breathless headlines, but encouraging. And fewer small businesses in the BTOS say their revenues have recently decreased, from 42% in January to 31% at the end of April.

In the latest Small Business Credit Survey (SBCS), produced by the 12 banks of the Federal Reserve System, the “Employer Firm Performance Index” returned to positive territory for the first time since 2019.

Things are rosier when small businesses are asked about their outlook. In Bank of America’s “2023 Small Business Owner Report,” two-thirds of survey respondents expect their revenue to increase in the next 12 months That was a slight tick downward from previous survey findings, but higher than in any pre-Covid year.

Likewise, 56% of small business owners in the SBCS expected an increase in their revenues during 2023. More moderation is found in the Census BTOS, where the share of small business owners expecting “above average” future performance (on a six month horizon) has risen ever so steadily for the last five months. Most simply say they expect their future performance to be average.

When they’re optimistic about their growth prospects, small business owners seek external credit. In the SBCS, 53% say the reason they apply for a loan or line of credit is growth or pursuit of new opportunities. According to the Bank of America survey, 82% of small business owners expect to seek external funding this year, with business credit cards as the main product of choice. (By contrast, just 29% said they intend to seek a bank loan.) In another sign of possible optimism, over half of respondents in the National Federation of Independent Business (NFIB) sample made a capital expenditure in the past six months.

Bad News: Creeping Pessimism

There is, however, plenty of reason for concern in the small business data. Start with the big picture: small business owners are very bearish about the course of the overall economy. In the Bank of America survey, 72% are concerned about a recession and just one-third expect the state of the national economy to improve. According to NFIB, there is a net negative 47% reading on whether general business conditions will be better or worse in six months. In other words, deep pessimism.

Indeed, the NFIB Optimism Index fell month-over-month and “for the fifteenth consecutive month [is] below the 49-year average.” Interestingly, the “hard” components of the Optimism Index (mostly “plans”) remain elevated while the “soft” components (e.g., “expected”) have sunk lower. To the eye, there hasn’t ever been this wide of a discrepancy between the two.

Now let’s look at actual performance. In the outstanding Intuit QuickBooks Small Business Index, employment growth at small businesses has fallen for eight consecutive months (see chart).

The “Expectations Index” in the Fed SBCS fell in the most recent survey and remains well below pre-Covid levels (see chart).

Similar signs of retrenchment can be found in the NFIB survey:

  • Just 2% of respondents say now is a “good time to expand.”
  • Hiring plans have trended downward.
  • The share of small businesses planning capital expenditures is just 20%, the lowest level since March 2021.

If You Want It, You Can Find It

Still, part of the joy—and challenge—of working with small business surveys and data is that you can find pretty much any story you want to tell. While there are signs of a pullback in hiring, for example, in the Bank of America survey, a higher share of small businesses (34%) expect to hire new employees over the next 12 months than in the previous survey. And while the share of small businesses with job openings in the NFIB survey is lower than a few months ago, it is still elevated compared to pre-Covid.

As always, there’s so much more to dig into, from financing trends to persistent concerns over inflation and interest rates. Stay tuned for more updates as new findings get released in coming weeks.

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Forbes Staff

Forbes Staff is an official member of the esteemed Forbes team, dedicated to delivering high-quality content and insightful journalism. With a deep understanding of the industry and a passion for uncovering compelling stories, Forbes Staff brings their expertise to the world of fashion. As a trusted member of the Forbes team, they contribute to the renowned Forbes platform, providing readers with valuable insights into the global fashion landscape.

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