Index Drops for Fourth Straight Month, Improved Cash Flow Not Offsetting Pessimism over National Economic Picture

November 2007

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Economic confidence among small business owners declined for the fourth straight month in November, as increased pessimism over the U.S. economy dragged down indicators of relative stability at the small business level, according to the Discover^® Small Business Watch^SM.  At 93.2, the confidence measure is down from 96.8 in October and from 114.6 at this time last year.

“Challenges in the national economy over the past few months are no doubt influencing the perceptions of small business owners, but there still is stability back on Main Street,” said Sastry Rachakonda, director of Discover’s business credit card. "Cash flow has improved for the past two months, and the dip we’ve seen in their confidence in their own business prospects is far below the drop in confidence they expressed in the health of the overall economy." 

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

November Key Findings

• 68 percent of owners feel that economic conditions in the U.S. are getting worse, a jump from 59 percent in October and 20 points above November 2006. Twenty percent said national conditions are getting better, while 10 percent said economic conditions are staying the same.
  
• 38 percent said they had experienced cash flow issues over the last 90 days, a decrease from 42 percent in October and 46 percent in September.
• 31 percent of small business owners feel that economic conditions for their businesses are getting better, a decrease from 35 percent in October.
  
• Plans for spending on business development are slowing, with 29 percent planning to increase spending on activities such as advertising and inventory, compared with 33 percent in October. Forty-two percent plan to decrease spending, compared to 36 percent in October.  
  

Poll: Consumers More Likely to Use Businesses with Web Sites

• The November Watch poll found that two-thirds of American small businesses do not have Web sites, according to the Discover Small Business Watch monthly poll of 1,000 business owners with five or fewer employees. At the same time, 51 percent of 4,000 consumers polled said they go online to research products, businesses and services prior to making a purchase. And 49 percent of consumers said they were more likely to use a business or service if it has a Web site.
  
  “A lot of small businesses still are not taking advantage of the added value of having a Web site,” Rachakonda said. “Our findings show that consumers are more likely to purchase something from a company with a site.”
  
  “Security seems to be less of a concern among online shoppers,” Rachakonda said. “The cost of shipping would seem to be more of an issue than security.”

More Poll Results

• 95 percent of consumers who make online purchases at least once a month feel very or somewhat secure with their transactions.
• 75 percent of regular online shoppers said the cost of shipping has stopped them from making a purchase online.
  
• 50 percent of owners said their Web sites generate direct sales leads for their businesses.
• 49 percent of business owners regularly communicate with customers via e-mail.
  

Holiday Spending

• There is no indication consumers will increase or decrease Internet purchasing this holiday season. The poll found that 49 percent of buyers plan to do most of their shopping at chain or department stores, 13 percent at a small retail or specialty shop, 11 percent online, 5 percent via catalogs, and 22 percent hadn’t made up their minds yet. These percentages are nearly identical to what the Watch found last year.

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 research methodology.