Small business index reflects optimism and uncertainty

The latest results of a quarterly survey of small business owners reflect both optimism and uncertainty.

“While we are seeing measured signs of recovery and businesses in general continue to improve their balance sheets, small business owners are still uncertain about the future,” said Marc Bernstein, head of the small business division for Wells Fargo.

The Wells Fargo/Gallup Small Business Index climbed to 16 for the second quarter of 2013, up seven points from the first quarter and 27 points from the fourth quarter.

While the index remains lower than the 23 reported for the second quarter of 2012, the latest reading is the third highest since the third quarter of 2008.

The latest index was based on telephone interviews with 603 small business owners conducted in April. The index takes into account the responses to 12 questions, six about current circumstances and six about expectations. A reading above zero indicates an optimistic response.

A key factor in the latest index reading was the reported improvement in cash flow: 48 percent of small business owners responding to the survey upon which the index was based said cash flow was very or somewhat good over the past year. That proportion is seven points higher than the first quarter and the highest reading since the first quarter of 2009.

Looking ahead to the coming year, 53 percent of owners said they expect cash flow to be very or somewhat good.

Concerns remain, however. Asked to describe the most pressing challenges they face, 21 percent of owners cited attracting customers and new business. Regulations ranked second at 10 percent, followed by a weak economy and taxes at 9 percent each and health care at 8 percent.

“Small business owners who now have stronger cash flow than at any time since the start of the Great Recession tell us they’re focused on generating more steady sales, and many are holding off making investments in their business until that happens,” Bernstein said.