Small business owners are the most optimistic they have been in five years, according to the latest quarterly Wells Fargo/Gallup Small Business Index, and they expect their businesses to increase cash flow and hire more employees in 2014.
In the nationwide survey conducted Jan. 6-10, the overall score increased to a positive 45, up from a positive 24 in October 2013. This is the highest since the third quarter of 2008, but still well below pre-recession levels.
Among the findings:
* Improved cash flow: In the January survey, more small business owners said they had good cash flow over the past 12 months than they did last quarter (52 percent compared to 46 percent). A larger majority of business owners also expect to have good cash flow in 2014 (57 percent compared to 52 percent).
* Increasing hiring: More small business owners said they expect to increase hiring in the next 12 months than in last quarter's survey (22 percent compared to 16 percent).
* Increasing revenue: A larger percentage of small business owners expect their revenue over the next 12 months to increase (48 percent compared to 44 percent).
* Accessing credit: Fewer small business owners in the current survey reported having difficulty obtaining credit than did so last quarter (23 percent compared to 27 percent).
The national optimism echoes what Wells Fargo hears from small business customers in New Jersey, according to John Cole, Northeast Business Banking Division Manager and Jane Navarria, the bank's New Jersey Business Banking Area Manager.
"We are seeing that same optimism here in New Jersey with our small business clients," Cole said. "We see it evidenced in the growing pipeline for loans. Loan demand is up when businesses are investing and growing their business, and hopefully alongside that growth comes growth in jobs." To meet the increased demand for loans and financial services by small businesses, with sales from $2 million to $20 million, Wells Fargo is hiring additional staff in New Jersey, he added.
Navarria said in her conversations with New Jersey businesses, she finds them "really focused on looking for advice on how to stay relevant or perhaps even reinventing themselves. I've had some recent conversations with businesses looking to revise business models to improve market response and stay relevant for the long term. Also businesses that are looking to find new niches and areas where they can really optimize and grow revenue in their space."
Navarria said the increased hiring plans of business are one very positive finding of the survey. She said businesses are focused on maximizing their investment when they hire someone "and finding the right skills at the right price. That might be challenging for some businesses."
Cole said "One of New Jersey's strengths is clearly the intellectual capital the state brings to bear. So the good news for the companies that are being appropriately selective is that we do have a rich talent pool: it's just a matter of finding that fit."
Asked to identify their biggest challenges, the top concern was finding new business, followed by the economy, government regulations, hiring and healthcare.
Small business owners were asked about their retirement plans, and a majority are not ready to sell their business or stop working. More than half estimate the best time to sell would be in the next 1-10 years. About a quarter said the best time would be more than a decade from now. And 62 percent are not worried about being able to sell their business when they are ready.
At 55 percent, many said if money was no object they would continue working full or part-time, while 26 percent said they would retire completely and 13 percent would start another business. Only 4 percent would choose to work for someone else.
More than half of business owners (57 percent) are either very or moderately worried about not being able to pay medicals costs for a serious medical issue in retirement. That is down from 64 percent in the third quarter 2010. About half of business owners (55 percent) are either very (26 percent) or moderately worried (29 percent) that they will not have enough money in retirement. The percentage reporting worry in third quarter 2010 was 64 percent.
Fewer business owners are worried about building back retirement income lost in the recession (50 percent are either very or moderately worried, down from 68 percent in third quarter, 2010).