Key Findings

Small Business Environment

U.S. Economic Optimism Steadies After Q1 Jump

Chart detailing concern over economic worries, specifically in the south where perception fell to 43%.

Optimism regarding the American economy steadies to 47% after jumping to 55% in Q1, amid tax reform. Small business owners’ perception of the U.S. economy in Q2 is still the second highest rating in the history of the survey.

While the perception of the national economy remains positive, local economic health continues to be the primary barometer for the experiences of small businesses. The number rating their local economy as good increased to 48%, tied for the strongest mark on Index record. Small business owners in the Midwest (50%) and Northeast (47%) are more confident in their local economies, with each region increasing by 10 points. Small business owners in the West are now the most confident (55%, up four points from last quarter), while confidence among those in the South has dropped 10 points from last quarter to 42%.

Those in the Northeast and West feel less confident in the national economy compared to last quarter and Southern small business owners’ confidence has dropped significantly (19 points to 43%). There has been no change in Midwesterners’ outlook of the national economy.

Male small business owners feel more confident in the national economy, with 49% rating the overall health of the national economy as good compared to 40% of female small business owners. Male business owners rate their local economy as good (49%) compared to female small business owners (45%).

Three-fourths (75%) report their level of local competition has stayed the same compared to six months ago (down from 77% last quarter). In terms of sectors, manufacturers are least likely to report an increase in local competition (9%), and retailers and professional service firms are most likely (17% and 18%, respectively).

U.S. Economic Optimism Holds SteadyChart illustrating the steady sentiment in U.S. economic health

Small Business Expectations

Small Businesses Have High Expectations, but Remain Cautious

Graphic indicating that small businesses plan to increase staff

Female small business owners are more optimistic about the year ahead than their male counterparts with 65% of woman-owned small businesses expecting higher revenue in the next 12 months compared to 61% of male-owned small businesses. Women also anticipate more hiring growth (36%) compared to men (30%) and a greater increase in investment (30% to 28%, respectively).

A majority of small business owners expect higher earnings for the fourth quarter in a row, with 62% anticipating an increase in revenue one year from now. The increase was one percentage point from last quarter. Small businesses with more than 100 employees are the most optimistic, with 72% expecting higher earnings in the next year.

About one in three small business owners expect to increase headcount (tied for the highest in the history of the Index), the bulk of new hiring will come from larger small businesses, 61% of businesses with 100 or more employees expect to add staff (nearly double the 32% of all businesses that expect to hire).

More small businesses are expecting to keep investment activities stable. Only 10% of businesses report plans to reduce investment in the coming year, the lowest on Index record.

If their business starts to struggle, most small business owners feel ready to deal with the rocky road ahead. Nearly nine in 10 small business owners (87%) report they have clear metrics to indicate whether their business is struggling. Most (86%) have a clear idea of how to pivot to get back on track if they begin to struggle. About eight in 10 (81%) have a business plan to adapt to a changing economy.

Larger Businesses Report More Plans to Increase Staff over The Next YearGraphic indicating that small businesses plan to increase staff

Small Business Operations

Small businesses are Strong, but Confidence is Not Equally Shared

Small business health remains strong, with 61% reporting good overall health, unchanged for the fifth consecutive quarter. Nearly two in five (38%) small business owners report that their businesses are in very good health, consistent with last quarter (37%).

The overall business health sentiment gap between small businesses owned by men and women increased by two percentage points this quarter. Male-owned small businesses report good overall health (64%), versus 51% of female-owned small business owners. Those in manufacturing (66%) and professional services (62%) are the most confident about their business’ health, while retail continues to be the least confident sector (53%).

Nearly one in five small business owners (18%) reported increasing staff over the past year, up from 16% last quarter. The increase in hiring was concentrated in businesses with more than 100 employees, 56% of whom reported adding headcount in the past 12 months.

Generally, cash flow considerations have remained stable and strong, with more than three-quarters of small business owners (79%) feeling comfortable. Women-owned small businesses report being comfortable with cash flow (70%), and male-owned small businesses, 83%. About one in five small business owners (21%) say they are spending more time dealing with licensing, compliance, and other government requirements, up three percentage points from last quarter.