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America’s small businesses reported higher levels of confidence and more optimism about their financial future this quarter, according to data from the Q1 2020 MetLife & U.S. Chamber of Commerce Small Business Index (Index). The survey of 1,000 small business owners—conducted between December 19, 2019 and January 31, 2020—also indicates that small business owners are in a position of strength to deal with the possibility of continued economic fluctuations due to the global spread of COVID-19.
The Index rose to 71.7 this quarter, up 0.4 points from 71.3 last quarter. This is the highest score since the survey began in 2017 and marks the third consecutive quarter that the Index has set a new record.
The survey also showed some ambivalence about the economy, especially the everyday economy business owners see in their neighborhoods and from their storefront windows. The number of small businesses who reported good local economic health declined significantly (from 59 percent in Q4 2019 to 52 percent in Q1, down seven points). Small business optimism also went down for three indicators: overall business health, comfort with cash flow, and staff increases. In contrast, small businesses’ views of the national economy improved, resulting in a slightly higher overall index score.
Regionally, the South reported the most optimism, while the Northeast was more downbeat. Southern small businesses were most likely to see a good national (61 percent) and local (60 percent) economy. While Northeast small businesses were more pessimistic about both: 45 percent say their local economy is good and 58 percent said the national economy is good. Western and Midwestern small businesses saw the national economy as being in good health (both at 60 percent), but fewer said their local economies were healthy (51 percent for the West, 47 percent for the Midwest).
Another interesting economic development from this quarter’s Index is an uptick in small manufacturers’ investment plans. Their outlook rebounded 11 percentage points, with 30 percent planning to increase investment, versus 19 percent in Q4 2019.
The Index survey, taken before community spread of COVID-19 in the U.S., did not capture the latest reactions to the virus among the small business community. At a U.S. House of Representatives Small Business Committee hearing, many small businesses testified to the sudden hardships their businesses are now facing. The hearing was called in the wake of the passage of an $8.3 billion emergency supplemental bill which included a provision enabling the Small Business Administration (SBA) to make an estimated $7 billion in low-cost loans to affected small businesses.
In a statement for the record sent to the committee, Christel Slaughter, CEO of SSA Consultants and chair of the U.S. Chamber of Commerce’s Small Business Council, said that the U.S. Chamber supports the SBA loan initiative and a comprehensive, fact-based response to the virus.
“The Chamber is ensuring the business community is ready for any scenario, but urges that the response to the coronavirus is grounded in facts, not driven by fear,” Slaughter said. “The Chamber believes that businesses, working with government, can help instill the confidence and calm that is necessary both to contain the coronavirus and maintain economic growth.”
The U.S. Chamber has launched four task forces to prepare businesses for any potential long-term economic effects of the coronavirus: Employee Support, Business Operational and Revenue Disruption, and Supply Chain and Trade Disruption. An additional task force will focus exclusively on addressing the unique needs of small and medium-sized enterprises, Slaughter said.
For more on the U.S. Chamber’s response to COVID-19, see the U.S. Chamber page on “Combating the Coronavirus.”
Minority-Owned Small Businesses See Key Differences
The Index also surveyed minority-owned small businesses and asked them about their attitudes and insights. These minority-owned businesses reported facing similar challenges to their peers, but also noted some key differences.
For example, minority-owned small firms are more likely (49 percent) to rely on personal savings than all small businesses (43 percent) to fund and grow their small businesses. Minority-owned businesses are also seven percentage points more likely to report an increase in competition when compared to non-minority-owned businesses (20 percent versus 13 percent).
Minority-owned and non-minority-owned businesses did tend to agree on some key points. Nearly two-thirds (65 percent) of all small businesses said that hiring ethnically- and racially- diverse candidates is beneficial to business (74 percent of minority-owned businesses said the same). Also, a majority of all small businesses (64 percent) believe more firms should focus on hiring minorities and 62 percent of all small businesses say diversity/inclusion programs should be more prevalent. In comparison, 74 percent of minority-owned small businesses believe more firms should focus on hiring minorities and 75 percent say diversity/inclusion programs should be more prevalent.
This quarter, minority-owned businesses also report more optimism about the future. Minority-owned businesses more often have plans to increase staff (38 percent versus 27 percent for non-minority-owned), plans to increase investment (39 percent versus 26 percent), and are more optimistic about future revenue (64 percent versus 58 percent) than non-minority-owned firms.
“We have never been better prepared for growth. We are staffing up,” said Padma Vatsavai, Founder and CEO of Vinformatix in Baton Rouge, Louisiana. “Vinformatix is expanding into the Federal contracts space this year and has made several strategic hires to better position our company for success in this large, competitive market.”
The Index is part of a multiyear collaboration by MetLife and the U.S. Chamber to elevate the voice of America’s small business owners and highlight the important role they play in the nation’s economy.