Small Business Watch

June 2008

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Economic Confidence Drops to New Low, Nearly 8 in 10 Feel Economy is Getting Worse

After a brief rebound in May, economic confidence among small business owners dropped to a record low in June as the number of those who think the U.S. economy is getting worse expanded to nearly 80 percent. The Discover Small Business Watch plummeted in June to 71.8, down 10 points from 81.8 in May.

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

May Key Findings:

• Nearly eight out of 10 small business owners, 79 percent, think the U.S. economy is getting worse – an increase from 71 percent in May and the highest level recorded since the inception of the Watch in August 2006.
• 53 percent of owners say that economic conditions for their business are getting worse, compared to 47 percent in May.
• 58 percent rated the economy as poor, an increase from 50 percent in May.
• 42 percent say they have experienced cash flow issues over the last 90 days, an increase from 39 percent in May.
• 75 percent of owners will be decreasing or making no changes in what they spend over the next six months on business development activities such as advertising, inventories, and capital expenditures. Forty-five percent plan to decrease spending, 30 percent are making no changes, and 23 percent plan to increase spending.
• 8 percent of owners have plans to hire in the next few months, while 79 percent are making no changes and 10 percent plan to lay off workers.

Is the American Dream Still Within Reach?

• Only 40 percent of the 4,000 consumers polled by the Watch people think the American Dream is still a possibility, 11 percent aren't sure, and 48 percent said the dream is dead. However, if you're going to try, 58 percent of consumers say owning a small business is one way to go, while small business owners are more certain: 71 percent of them feel like they have a doorway to prosperity and a better life for their families.

Motivation Poll: Independence and Flexibility Are Top Motivators for Starting a Small Business

• Independence and flexibility continue to be the main reasons behind the choice to start a small business. Fifty-two percent of owners say they started a small business to have more flexibility with their time or to be more independent, an increase from 46 percent in 2007. Only 12 percent cited making more money as the primary reason for starting their own business, a decrease from 19 percent a year ago.
• 59 percent of owners would turn down a job working for someone else, even if offered more money than they currently make. This is down slightly from 61 percent who felt this way in 2007.
• 66 percent of small business owners agree that it is riskier to run a business than to work for a large company, although 44 percent said that starting their own business turned out to be, in retrospect, less risky than they first believed.
• When asked about the biggest challenge facing their business, 31 percent cited finding new business and 19 percent cited managing cash flows.
• Nearly half of small business owners, 46 percent, originally financed their small business with personal savings.

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.