• by Jack Loechner , Staff Writer @mp_research, November 5, 2007

Cash Flow Improves, Confidence Falls For Small Business Owners

According to the Discover Small Business Watch, reports the DMA, economic confidence among small business owners continued to fall in October as many expressed increased pessimism about both the future of their own businesses and the US economy in general.

The monthly survey of 1,000 small businesses with five or fewer employees shows that at 96.8, the Watch dropped more than two points from 99.2 in September and has been on a downward trend since July when it was 107.3. 41% of business owners who said conditions for their own operations were getting worse represents the highest degree of skepticism recorded thus far noted in the 15-month-old survey.

Only 42 percent of owners, however, were having temporary cash flow issues, compared to 46 percent in September.

Sastry Rachakonda, director of Discover's business credit card, said "... business owners... are exercising increased caution toward business development spending... the upturn in the cash flow situation (though) is definitely a positive sign... "

 October Key Findings:

• 35 percent of small business owners feel that economic conditions for their businesses are getting better, a decrease from the 40 percent in September and two percentage points lower than a year ago in October.  Those who saw their conditions getting worse was 41 percent compared to 35 percent in 2006.
• 32 percent of owners said that they rate the overall US  economy as excellent or good, down from last month's 39 percent and the lowest rating in this category since the Watch's inception.  In October 2006, 44 percent of owners rated the economy excellent or good.
• 42 percent said they had experienced cash flow issues over the last 90 days, a decrease from 46 percent in September, but higher than 34 percent from a year ago. 

"The buzz that general-interest networking sites are generating hasn't struck a chord with the Main Street small business crowd... " Rachakonda said. 55 percent of respondents said they would not consider using a service or small business that they heard about on a social or business networking Web site.

The study found that younger business owners use online networking the most.  In the 18-29 age group, membership at general online networking sites reached as high as 41 percent at some of the more popular online networking communities.  Membership among older age groups at the same sites is still significantly lower.

"...online forums... with the younger business owners... is likely to be the wave of the future," Rachakonda concludes.

For more information about this study, please visit here.