3 Out of 4 Small Business Owners Say Economic Conditions in Country Getting Worse; Economy Rates as Most Important Issue in Presidential Race

January 2008

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Few small business owners started out the year with confidence in the direction of the U.S. economy, according to the Discover^® Small Business WatchSM. The monthly index fell nearly 6½ points in January to 86.3, the second-largest point tumble in the 18-month existence of the poll. The index has been steadily decreasing since July, when it was 107.3.   

"We have a significant increase this month in the number of small business owners who think the overall economy is getting worse," said Sastry Rachakonda, director of Discover's business credit card. "Cash flow has dipped and spending on business development is down, which causes concern in this sector. However, the numbers that measure owners’ confidence in their own businesses have been fairly constant. It is too early to tell whether any of the proposed stimulus plans are affecting the mood of the small business segment of the economy."

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

January Key Findings

• 74 percent of small business owners feel that economic conditions in the U.S. are getting worse, a jump from 65 percent who felt that way in December.
• 44 percent said they have experienced cash flow issues over the last 90 days, also a slight increase from 42 percent in December but significantly more than the 32 percent in January 2007.
  
• 35 percent of small business owners picked the economy by far as the most important issue in the presidential campaign. The war in Iraq was a distant second at 14 percent; followed by government ethics and corruption, 13 percent; immigration, 11 percent; health care, 9 percent; national security, 8 percent; Social Security, 4 percent; and some other issue, 2 percent. Six percent were not sure.
• 26 percent of small business owners rate the U.S. economy as excellent or good, which is lower than the 29 percent in December who felt the same, and the lowest since surveying began in August 2006
  

Poll: Few Small Business Owners Offer Healthcare; High Costs Hamper Growth

• Healthcare costs continue to be a financial burden for small businesses, according to this month’s poll, which found that 77 percent of small business owners do not offer health insurance to their employees,  up from 74 percent last year.  
• Thirty-nine percent of small business owners said that the cost of health care has a major impact on their ability to grow, while seven out of 10 said that obtaining affordable health insurance for themselves and their employees was very difficult (51 percent) or somewhat difficult (18 percent).
  
  "Healthcare costs were having a big impact on businesses when we did this survey one year ago," said Rachakonda.  "This year’s survey shows that the situation has only worsened. Nearly four out of 10 entrepreneurs feel that healthcare costs have a major impact on their ability to grow."

Key Healthcare Poll Findings: Few Small Business Owners Offer Healthcare; High Costs Hamper Growth

• Thirty-nine percent of small business owners said that the cost of health care has a major impact on their ability to grow, while seven out of 10 said that obtaining affordable health insurance for themselves and their employees was very difficult (51 percent) or somewhat difficult (18 percent).
  
  “Healthcare costs were having a big impact on businesses when we did this survey one year ago,” said Rachakonda.  “This year’s survey shows that the situation has only worsened. Nearly four out of 10 entrepreneurs feel that healthcare costs have a major impact on their ability to grow.”
  

Key Healthcare Poll Findings

• 25 percent of small business owners said they are currently uninsured, up from18 percent who said the same last year.
• Only 15 percent of small business employers offer health insurance to their employees. Of those, 40 percent have considered discontinuing it because the cost is too high – a number that increased from 33 percent last year.
• Among those small business owners who do have healthcare coverage, 27 percent are insured by another family member’s plan, while 35 percent have purchased coverage separately.
• 34 percent of small business owners said their employees go without health insurance.
  
  “Small business owners have to be flexible and resourceful to find health insurance for themselves and their families,” Rachakonda said.  “But for those whose spouses don’t have health benefits, or for those who can’t afford to purchase a plan, they are simply going without.” 
  
  Small businesses that cannot find a way to provide health insurance for their employees should expect to have a more difficult time recruiting talent.  In a survey of 4,000 consumers, 49 percent said that health benefits were very important to them when seeking employment, while another 23 percent said coverage somewhat important in their decision to select a new job.
  

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.