Economic confidence among America's small business owners plummeted in November, as more owners cited serious concerns about cash flow and saw economic conditions for their own businesses getting worse. The Discover Small Business Watch index fell 12 points in November to 76.5 from 88.5 in October. "Fading confidence among small business owners could be tied to their low expectations for the upcoming holiday season, as 46 percent are forecasting decreased sales and 39 percent are expecting to hold the line," said Ryan Scully, director of Discover's business credit card. "However, we saw drops in optimism across the board, so it's hardly just one factor causing the concern." The mood of small business owners generally has soured in November for three straight years, as economic confidence dropped from October to November in 2007 and 2008. The November 2008 index of 67.5 is the low point for the Watch since it started in August 2006.
Learn more about the research methodology for the Small Business Watch.
November Highlights
- 52 percent of owners say they have experienced cash flow issues in the past 90 days, up from 44 percent in October. Forty-one percent of owners say they have not experienced cash flow issues, which is the lowest response in this category since the Watch began. The remaining 6 percent said they weren't sure.
- 53 percent of small business owners see conditions getting worse in the next six months, up from 43 percent in October; while 19 percent report that conditions are improving, a sharp decline from 29 percent in October; 23 percent see conditions as the same, and 5 percent weren't sure.
- 62 percent of small business owners rate the economy as poor, an increase from 55 percent in October; 30 percent rate it as fair, and 8 percent say it is good or excellent.
- 53 percent of small business owners think the overall economy is getting worse, up from 44 percent in October but still significantly lower than the 69 percent of owners who felt that way in February 2009, the last time the Watch index was this low. For November; 28 percent say the economy is getting better, down from 35 percent in October; 16 percent see it staying the same, and 3 percent are not sure.
Only 11 percent of Small Businesses Expecting Increased Sales This Year
Small business owners have a glum outlook on the holiday season: Only 11 percent expect to see more business this year over last, while 46 percent of them are expecting less business than last year, an increase over the 40 percent who said the same in November 2008; 39 percent anticipate 2009 sales will be about the same as last year, and 4 percent weren't sure.
For many small business owners, the holiday season is not necessarily their busiest time. A majority of owners, 56 percent, say that the holiday season falls somewhere in between being their busiest and the slowest time of year, 29 percent say this is their slowest time, and 13 percent say it is the busiest.
Discount Department Stores Still Most Popular for Holiday Shopping
This month the Watch also polled 3,000 consumers on issues important to small businesses. When asked to choose from a list of places where they expect to do most of their holiday shopping, they chose the following:
- Discount department stores, 30 percent
- Department stores, 18 percent
- Warehouse and club stores, 7 percent
- Small retail and specialty stores, 7 percent
- Electronics retailers, 5 percent
- Some other type of store, 9 percent
- Not sure, 23 percentThese shopping-preference percentages were little changed from what they were in 2008.
When it comes to the Internet, 57 percent of consumers said that they will do at least some of their shopping online this year.
Squeeze on Credit
Twenty-four percent of small business owners say that they extend credit to customers, and 73 percent of those that extend credit say that they have customers who have delayed or asked to delay a payment in the last three months. This is largely unchanged from December 2008 when 25 percent said they were extending credit, and 72 percent said that they had customers who delayed or asked to delay a payment.
Competition Takes Its Toll
What would you do if that convenient corner market or neighborhood hardware store near you suddenly closed? Did you ever consciously make a point to use a small business in the hope that your patronage would help keep it open? If so, you're in good company – 68 percent of consumers say that they have made purchases at a small business in an effort to keep it from closing.
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.
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