Key Findings

Small Business Environment

Perceptions of National and Local Economy Continue to Improve

U.S. Economic Optimism Holds SteadyChart detailing the steady hold of U.S. Economic Optimism

Small business owners’ perceptions of the national economy have ticked up again this quarter, with a record-setting 58% rating the health of the U.S. economy as very good or somewhat good, up three points from Q3.

Small business owners’ perceptions of their national economy have risen most in the Northeast, up 16 points to 61%, the highest across regions. The South has also seen significant gains in views of the national economy, up eight points from last quarter to 57%. Views in the Midwest hold steady at 60%. Only the West sees perceptions drop from last quarter down three points to 55%.

Perceptions of their local economy have also reached record highs, with 56% rating the local economy as very good or somewhat good, up from Q1 and maintaining the upward trajectory seen all year. The South continues to see dramatic gains, where 64% of small business owners rate the local economy positively, up a remarkable 15 points since last quarter.

Small business owners in the Northeast are the least positive about their local economy, but their perceptions ticked up three points this quarter to 49% rating it positively, after a slight dip last quarter. In the Midwest, perceptions of the local economy improved four points to 53%.

Perspectives on local competition remain unchanged since last quarter, with 18% of small businesses reporting an increase in competition and 74% saying competition has stayed the same, compared to six months ago. This figure varies by employee size and number of years in business, however, with larger small businesses (100-plus employees) reporting the highest level of new competition compared to smaller companies at 29%. A quarter of businesses younger than 10 years old report an increase in competition. In contrast, just 16% of more established businesses say they are seeing more competition cropping up in their local markets.


Small Business Expectations

The South Drives Upward Trend in Business Expectations

Graphic indicating percentage of businesses reported in good health

The Small Business Index paints an optimistic picture regarding small business owners’ expectations for the next year. Revenue expectations have increased four points this quarter, with 60% of small businesses anticipating a rise in their revenue over the next year, and more businesses anticipate hiring new staff this quarter as compared to last (30%, compared to 25% in Q3).

Expectations regarding future revenue are somewhat uneven across region, company characteristics, and demographic differences. In the South, 68% of businesses expect to increase revenue, the highest of all regions. On the other side of the spectrum, just over half of small business owners in the Northeast expect increased revenue in 2019. Businesses anticipating an increase in revenue in the coming year are more likely to be in the professional services sector and to employ over 100 people. This quarter, more male-owned businesses expect a bump in revenue (62%) compared to businesses run by women (53%). This represents a reversal in revenue expectations by gender from last quarter.

Tracking with regional differences in economic optimism and revenue projections, more Southern businesses (40%) expect to hire more staff in the upcoming year, nearly double the percentage of Northeast businesses who say they expect to hire. After a pullback on reported hiring in Q3, businesses employing 100-plus people are again bullish, with 59% saying they anticipate hiring new staff, similar to what we saw in Q2. While only 38% of such companies reported anticipating hiring new talent in Q3, this quarter, 59% say they anticipated hiring.

More businesses (29%) also plan to increase their investment, a figure that is up seven points from Q3. That said, slightly more companies expect to reduce investment this coming year as compared to last quarter (12% in Q4 compared to 10% in Q3). Mirroring trends in future revenue and hiring, the South leads the country in the proportion of businesses expecting to increase their investment in 2019 at 38%. In all other regions, about a quarter of businesses anticipate increased investment.


Small Business Operations

Perceptions of Businesses’ Overall Health Remains High

Small business owners’ perceptions about the overall health of their businesses remain steady from last quarter, with 64% feeling either somewhat good or very good. Those reporting that they believe their businesses to be in very good health ticked up one point from Q3.

The vast majority of larger small businesses (100+ employees), 86% to be exact, report that their businesses are in good health. Patterns in reporting across sectors varied somewhat from Q3 to Q4. Retail trails all sectors in the proportion of owners reporting good overall health, representing a decrease to 52% in Q4 from 57% in Q3. Similarly, the number of businesses in the professional services sector reporting good health has dropped 10 percentage points from last quarter to 66% in Q4. .

Larger Businesses Planning to Increase Staff Over the Next YearGraphic indicating that revenue expectations are expected to fall

The percentage of businesses that report hiring new staff in the past year remains constant between this quarter and last at 19%, with the Northeast reporting the lowest percentage (15%). More than half of all larger small businesses (55%) say they hired new staff last year, compared with about a quarter of businesses with fewer than 100 employees. Significantly more minority-owned businesses report hiring new talent this past year compared with white-owned businesses (27% compared to 18%). Compared to last quarter, slightly more small businesses report having to reduce staff.

Eight in 10 small business owners report feeling comfortable with their cash flow, consistent with Q3. This proportion does not vary significantly across industry or region. Male-owned businesses report a slight dip from 83% to 80% between Q3 and Q4 and more female-owned businesses report feeling comfortable with cash flow compared to last quarter (81% vs. 75%).

Small business owners say they spent slightly more time dealing with licensing, compliance, and other government requirements this quarter compared to last; however, the percentage of businesses reporting an increase in time spent handling these issues was just 23% (up from 20% last quarter).