Small Business Confidence Jumps in January

January 2010

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America's small business owners expressed higher economic hopes in January, largely due to increased expectations that conditions for their own businesses would improve in the next six months, according to the Discover Small Business Watch. The Watch index jumped to 85.5 from 77.0 in December.

Learn more about the research methodology for the Small Business Watch.

January Confidence Indicators:

• More small business owners are planning to increase business development spending over the next six months, with 25 percent noting they will spend more on activities such as advertising, inventories and capital expenditures. This number is up from 18 percent in December. Further, 28 percent plan to make no changes, while 45 percent will decrease spending, down from 51 percent in December.
• 29 percent of small business owners see conditions for their own businesses getting better in the next six months, an improvement from 22 percent in December and 19 percent in November; 43 percent see conditions getting worse, 23 percent expect things to stay the same, and 4 percent aren't sure.
• The number of small business owners who think the economy is getting better rose to 31 percent in January, up from 25 percent last month; 46 percent see the economy getting worse, down from 49 percent in December; 18 percent see the economy staying the same and 4 percent are not sure.
• 8 percent rate the economy as good or excellent, up from 4 percent in December; 34 percent rate the current economy as fair, and 58 percent rate it as poor.
• 51 percent of owners have experienced cash flow issues in the past 90 days, unchanged from December; 46 percent of owners have not experienced cash flow issues, and 3 percent are not sure.

Wariness Over Health Care Reform

• When asked how their health insurance situation would be affected by health care reform, 58 percent of small business owners say it will become worse, 23 percent think their situation will be better, 15 percent see no impact and 4 percent are not sure.
• Eighty-one percent of small business owners say they do not offer health insurance to their employees, down from 85 percent in January 2009, but still above the 77 percent in January 2008 and 74 percent in January 2007. Among owners who offer health insurance, 29 percent have considered discontinuing it because of the cost.
• 21 percent of owners are uninsured, down from 25 percent in January 2009. Of those who are insured, 34 percent of owners receive their coverage from another family member's plan, 32 percent purchase it separately and 12 percent get it through a company plan.
• When asked if any of their employees go without health insurance, 28 percent of owners say yes, while 53 percent say no, and 19 percent are not sure.
• 68 percent say that it is "very difficult" or "somewhat difficult" to obtain affordable health insurance.
• 62 percent of owners say that the cost and concerns over health care will prevent some people from starting a small business.
• 60 percent say that the cost of health care has an impact on their business, with 34 percent saying that the impact is "major."

43% of Small Business Owners Have 2010 Funding Needs

• Forty-three percent of small business owners say that they will need to raise money this year in order to keep their business going, up from 32 percent in January 2009. Forty percent will not have to raise funds for their business, while 17 percent are not sure.
• For those who need to find funding, owners chose the following as their first choice of a source: Personal savings, 25 percent, down from 19 percent in January 2009; bank loan, 20 percent, up from 18 percent in January 2009; friends or family, 13 percent, down from 20 percent in January 2009; home equity loan, 9 percent, up from 1 percent in January 2009; credit cards, 4 percent, down from 9 percent in January 2009; some other way, 19 percent, down from 24 percent in January 2009; not sure, 10 percent.

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

The Discover Small Business Watch is a monthly index of the economic confidence of the nation's 22 million businesses with 5 or fewer employees. Learn about our small business research methodology.