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Small Business Digest


Small Business Leaders Not Optimistic About 2013

In the aftermath of the Presidential election, many small business leaders say they are more pessimistic about near and long term growth for their companies and the country.

Two major monthly surveys and this newsletter's own polling show a strong feeling of pessimism about the election outcome and the near future.

The small-business community exhibited an overwhelmingly negative response to the presidential election through a dramatic drop in owner confidence, reported by the National Federation of Independent Business (NFIB) Small Business Optimism Index. In one of the lowest readings in survey history, the Index dropped 5.6 points, bottoming out at 87.5.  

“Something bad happened in November—and based on the NFIB survey data, it wasn’t merely Hurricane Sandy. The storm had a significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence,” said NFIB chief economist Bill Dunkelberg. “Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind. Between the looming ‘fiscal cliff,’ the promise of higher health-care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism. We are forced to ask: is this the new normal?”

Overall average small business revenues declined in October according to the Intuit Index and more people became self-employed, further spreading the available pool of sales available.

The October Intuit Small Business Revenue Index shows a 0.3 percent decline from the previous month. The real estate and health care industries saw the biggest drop-offs, at 0.9 and 0.7 percent respectively. Professional services followed with a decline of 0.6 percent. The index is based on data from QuickBooks Online and covers the period from January 2005 through Oct. 31.
 “The decline in small business revenue is disheartening, and appears to be happening despite a rise in single-family construction and existing home sales,” said economist Susan Woodward. “There has also been a 4.4 percent increase in the number of people who are self-employed since November 2011. That brings new entrants to compete with incumbents and may explain the steady decrease in revenue per small business.”

At the same time, the recently released Thomson Reuters/University of Michigan Surveys of Consumers shows that consumer confidence remains at its 5 year high, with the November’s Sentiment Index at 82.7, virtually unchanged from the 82.6 reading in October. The Lending Circle highlights this new data to point out that based on the current survey consumer optimism remains high, however, the continuation of that optimism is relying on the government keeping taxes low.

Something most political observers view as unlikely as President Obama pushes for higher taxes.

Companies are rushing to push dividends and other investment funds to shareholders in 2012 in expectations of higher taxes in 2013.

For small business owners, the new taxes are expected to eat into their personal financial rewards.

A majority of small business owners polled by this newsletter’s parent said they were disappointed by the results of the Presidential contest. While hopeful President Obama would be sympathetic to their needs, a significant majority (61%) said they were worried his priorities would not help them in the near-term.

The poll was taken during the three weeks immediately following the election and encompassed 300 owners/presidents across the nation.

Hair salons and spas, an industry highly dependent on consumer discretionary funding while reporting they are optimistic about the future also say they are unsure about 2013.

Sunovis Financial’s Professional Beauty Association Salon/Spa Performance Index registered a drop in the third quarter of 2012, bringing it to the lowest level in 4 quarters. The Current Situation Index portion fell below 100 for the first time in nearly three years, indicating concern about contraction within the industry. The Expectations Index, a measure of the 6 month industry outlook, remained strong at 104.7, indicating continued optimism for the future of the spa/salon industry.

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