Small business owners have faced unprecedented challenges because of the COVID-19 pandemic and are in the midst of great uncertainty with the upcoming presidential election. The Q3 Wells Fargo/Gallup Small Business Index indicates, however, there is a continued spirit of forward-facing optimism among small business owners despite the persistent trials.
The overall score rose 12 points from last quarter’s historic low-water mark, driven by a sharp rise in sentiment about future expectations. The overall positive movement in sentiment was contrasted by the third successive quarterly decline in optimism about current business conditions.
The Q3 pulse check of business owners, fielded in early August, shows a clear dichotomy between the immediate challenges small businesses face and their views on the future. While only 19% of business owners feel optimistic about their present situation (a 20% decline from Q2), 41% feel optimism about what the future might hold, marking a 32% quarter-over-quarter rise.
Further illustrating this split in sentiment between current and future state, when asked about revenues, 48% of small business owners expected increases in the coming 12 months versus just 29% who reported actual increases in revenues over the past year. Furthermore, 7% fewer owners (55%) say they felt somewhat or very good about their cash flow in the past 12 months, while 16% more owners said the same about their cash flow in the coming 12 months.
“Small businesses have been navigating through incredibly stressful circumstances for the last several months,” said Steve Troutner, head of small business at Wells Fargo. “This latest survey data indicates that many have worked hard to make adjustments and are feeling better about their future prospects, yet they still face tough near-term struggles as the economy recovers at an uneven pace. During these tough times, we remain committed to doing everything we can to help small business owners adapt and succeed.”
The Q3 survey also delved into how business owners perceive the upcoming presidential election and found a high level of interest and engagement, with 97% that were planning to vote in November, and nearly 60% saying the outcome would have a major impact on their business. When asked what issues they would like to see the candidates focus on, three ranked highest: relief for small businesses, taxes and getting the economy back on track.
The handling of the economic fallout from COVID-19 was also noted as a critical expectation for the eventual winner, with 88% of small business owners calling the next president’s approach to this extremely or very important.
“It goes without saying that there are multiple major factors impacting how businesses’ owners feel right now, from navigating a pandemic to a hotly contested presidential election to an economy that remains significantly hampered, and it’s all happening in the same year,” said Mark Vitner, senior economist with Wells Fargo. “With the impacts still being felt in a wide swath of industries and sectors, the continued climb in owner optimism is an indication of continued hope that time will move them toward a better landscape for their businesses.”
While the loss of business or closings because of COVID-19 maintained its place as the top challenge for owners, this indicator dropped by 17 points to 27% quarter over quarter. Simultaneously, challenges in attracting new business rose five points to 15%, while concerns around financial stability and cash flow rose by four points to 11%. Meanwhile, though owners had called out taxes as a key issue in the upcoming election, only 2% said it was the top challenge in Q3.