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Survey: Small biz confidence holds

Economic confidence among small business owners remained steady in February, as the monthly Discover Small Business Watch index dipped slightly from 91.0 in January to 90.2. Although a few more small business owners said the overall economy is getting better, a rise in cash flow issues kept confidence flat.

Thirty-four percent of small business owners said economic conditions in the country are improving, up 3 percentage points from 31% in January; while 41% said conditions are getting worse, unchanged from January; and 20% said conditions are the same, down from 24%.

At the same time, 50% of small business owners reported encountering temporary cash flow issues within the last 90 days that caused them to delay paying bills, up 7 points from January; as 46% reported no temporary cash flow issues, down 3 points from the prior month. The average monthly percentage of small business owners who encounter cash flow issues in the 90 days preceding the poll is 43% over the past 55 months.

“Hope seems to be tempered by reality this month,” said Ryan Scully, director of Discover’s business credit card. “The number of small business owners seeing economic conditions getting better for their businesses is the highest we’ve seen since February 2008, but concerns over temporary cash flow show the biggest one-month spike since November 2009.”

Other February Confidence Indicators

  • Small business owners’ perceptions of the economic conditions for their businesses in the next six months were mixed in February: 33% said conditions are getting better, up from 31% in January; but 40% said things were getting worse, also up from 38% from January. Those who said conditions were the same dropped to 25% from 26% in the prior month, and the number of those who weren’t sure was 2% in February, down from 5%.
  • 56% of small business owners rate the current economy as poor, down from 57% in January; 32% rate it fair, down from 34%; 7% rate it good, unchanged from the prior month; and 3% rate the economy excellent, up from 2% last month.
  • The number of small business owners who plan to increase spending on business development activities such as advertising, inventories and capital expenditures in the next six months was 28%, down from 30% last month. Forty-one percent will decrease spending on business development, up one percentage point from last month; 30% do not plan any changes, up from 27% last month.

Taxes: Process Getting More Difficult to Organize

More small business owners report that the tax preparation process is harder this year than in any of the four previous years: 56% said it was very difficult or somewhat difficult to find and organize the documents they need. In 2007, the first year the Watch tracked this data, only 39% found very difficult or somewhat difficult to find and organize their tax documentation.

The process also seems more time consuming. This year 80% of small business owners said the tax preparation and documentation process was somewhat or very time consuming, compared to 73% last year, and also the highest in the past four years.

The taxes that still frustrate small business owners continue to be self-employment and federal income taxes.

Few Took Advantage of New Deductions

Seventy-four percent of small business owners said they did not take advantage of any new tax deductions for their business this year, compared to 11% who did and 15% who were not sure.

Compared to the average consumer, small business owners prefer to hire a tax professional than use a software program. Among consumers, 49% hired a professional and 26% used a software program, while 25% did neither. For small business owners, 68% hired a professional, 19% used a software program, and 13% did neither.

Consumers, on the other hand, are expecting more refunds: 45% of consumers are expecting a refund this year, compared to 50% last year; while 20% expect to break even and 24% expect to owe taxes.

Twenty-six percent of small business owners are expecting a refund, 29% expect to break even, and 38% expect to owe taxes.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who have less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 750 small business owners.

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