Small Business Optimism Takes a Dive as Revenue Growth Eases

NEW YORK (AP) — Small business owners' optimism has taken a deep dive in the first quarter as companies' revenue fell along with owners' expectations for their future sales.

That's the finding of a quarterly survey released Thursday by Wells Fargo and Gallup. Although the survey was taken Jan. 9-15, during the second half of the 35-day partial government shutdown, owners' sentiments seemed to be based more on their companies' long-term trends rather than the fallout from the closing of many federal agencies.

The Wells Fargo/Gallup Small Business Index fell to 106 for the first quarter from 129 in the fourth quarter.

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While 45 percent of the 603 owners surveyed said their revenue increased in the past 12 months, that was down significantly from the 55 percent who reported revenue gains in a survey taken during the fourth quarter. Owners also had diminished expectations for their revenue in the next 12 months, with 55 percent predicting higher revenue, down from 62 percent with that forecast in the previous quarter.

Weaker revenue appears to be having an impact on small business hiring. Twenty-two percent of owners said the overall number of jobs at their companies rose over the previous 12 months, but that was down from 27 percent who reported increased hiring three months earlier. The number of owners expecting the number of jobs to increase in the coming year fell to 29 percent from 35 percent.

While many owners have said in past surveys they struggled to find job candidates qualified for their open positions, many have also said in the aftermath of the Great Recession that they were being cautious and wouldn't take on new staffers unless their revenue justified the added expense and risk.

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The Wells Fargo survey showed that the shadow of the recession is indeed still having a significant impact on small business attitudes. Nearly 70 percent of the survey participants said their companies were affected some or a great deal by the recession, and 45 percent said the recession has some or a great deal of influence on the way they run their companies today. When asked what was the greatest lesson learned from the recession, the most frequently-mentioned lesson was being conservative about spending; it was cited by nearly a fifth of the owners.


By AP reporter Joyce Rosenberg

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