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Challenges Still Persist As Small Business Leaders Turn Cautiously Optimistic

The Gallup U.S. Economic Confidence Index rose to -18 in the week of January 7-13, a slight improvement over the -21 reading the week prior. While confidence remains lower than it was in the weeks before and after the presidential elections, it is higher than through all of 2011 and the rest of 2012, continuing an uptrend established since the -54 low in September 2011.

The Gallup Economic Confidence Index is based on surveys of Americans concerning their feelings about the current economic situation and their perception of whether or not the economy is improving. Gallup began tracking economic confidence in 2008 and the Index has yet to reach positive territory. The -10 reading the week before the 2012 presidential election is the highest it has ever been.

Treasury Secretary Geithner believe the country is on a slow track to economic recovery.

Many small business leaders seem to agree with his assessment while still not being overly optimistic.

According to Kevin Kerridge Director for Hiscox Small Business Insurance ”with so much uncertainty worldwide, it’s not surprising that small business owners have a somewhat tempered optimism and are learning to effectively play both offense and defense when it comes to complying with regulations, finding new customers, keeping their businesses afloat and thriving in the New Year.” 

He made his comments as his company released its annual DNA of an Entrepreneur (eDNA) report which Kerridge feels provides insight into the outlook of small business owners across the globe in 2013.

The 2012 eDNA report provided a glimpse into the mindset of a several thousand small business owners and entrepreneurs across six countries, as they cope with the economic crisis and prepare for 2013.  The eDNA report, which surveyed 3,000 owners or partners in businesses with fewer than 50 employees -- in the U.S., UK, Netherlands (NL), Germany (DE), France (FR), and Spain (ES) – and highlights a number of emerging and evolving trends that small business owners identify with, regardless of geographic location.

Lingering effects of the economic downturn: Not surprisingly, increased stress was the biggest single personal impact of the downturn, reported by 43% of all respondents globally. Similarly, 31% of all small business owners surveyed reported some sort of sleeping problem.

In the U.S., that might be attributed to small business owners’ ongoing anxiety about taxes and the bulging federal deficit. Many also opposed the health care overhaul and said they feel squeezed by excess regulations with  more than three-fifths (61%) of U.S. respondents reporting that the U.S. taxation system does not favor startups.

More women reported stress, sleeplessness and health problems overall than men. Perhaps most significantly, average stress levels remained unchanged from last year’s eDNA report, although most small business owners across the globe are finding life tougher.

Glass half full: Still, true to form, nearly half of respondents across all countries reported being decidedly optimistic about the year ahead, and four out of six countries showed increased optimism: the U.S. from 45 to 55%; the UK up from 40 to 47%; Germany from 55 to 59% and the Netherlands from 53 to 61%. This is an encouraging, positive trend for most countries, though not all.  As the economy continues to worsen in Southern Europe, the Spanish and the French are as glum or even glummer than they were a year ago, when optimism levels declined from 41% to 28% and  from 47% to 35%, respectively.

Social media slowly gains ground: While traditional marketing tactics are still the most valuable for most small business owners (eight in ten respondents globally cited “word of mouth recommendation” as the best way of promoting their businesses), the growing need for small business owners to take advantage of social media is undeniable. 

He cited the recent Smarter Small Business report released by the Center for an Urban Future (CUF), found that fewer than 20% of small businesses even in notably entrepreneurial New York City are capitalizing on technology. 

Findings from the eDNA study were similar, revealing that only 29% of respondents globally are actively using social media for their businesses, but a further 23% wanted to use it or were eager to learn. The main reason for using social media, cited by over half of respondents, was to provide service and communication to customers, followed by general communications, PR and marketing (51%) and prospecting for new customers (36%).

Social media usage varied among the countries surveyed. American small business owners (35%) were most likely to use social media for their business, followed by the Spanish (33%). Germans (21%) and the French (20%) were the lowest users of social media.

Cybercrime explodes as a crippling threat: As small businesses slowly but surely begin to rely more on new technologies to remain competitive in the local and global marketplace, they are also becoming more susceptible to cybercrime attacks. In the study, respondents were asked to evaluate three different computer-related threats in terms of risk to their own businesses. The most prevalent threat, cited by 41% of respondents, was a computer virus, followed by “theft or accidental loss of a computer or notebook or a data storage device” (cited by 32%). Though cybercrime came in third overall (27%), American respondents had the greatest fear of cybercrime (34%), while the Germans (22%) and the British (21%) had the least.

Despite struggles, moving onward and upward: Despite the overall sense of prevailing gloom and the economic challenges, the downturn has helped to strengthen the resolve of small business owners on a global scale. Three in ten respondents said that it had made them stronger and more determined to succeed, and 31% said the downturn spurred them to work more efficiently.

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