Confidence Among Cost-Conscious Businesses Drops, Survey Finds

Budget-conscious businesses remain pessimistic about their holiday sales this season, with 53 percent of businesses surveyed saying they see conditions worsening over the next six months.

The Discover Small Business Watch, compiled each month by research firm Rasmussen Reports, found economic confidence among America's small business owners plummeted in November, as more owners cited serious concerns about cash flow and saw economic conditions for their own businesses getting worse. The Small Business Watch index fell 12 points in November to 76.5 from 88.5 in October.

The survey, which received responses from approximately 750 small business owners, suggests the mood of small business owners generally has soured in November for three straight years, as economic confidence dropped from October to November in 2007 and 2008. The November 2008 index of 67.5 is the low point for the Watch since it started in August 2006. The survey found 52 percent of owners said they have experienced cash flow issues in the past 90 days, up from 44 percent in October, and 41 percent of owners said they have not experienced cash flow issues, which is the lowest response in this category since the Watch began. The remaining six percent said they weren't sure.

Fifty-three percent of small business owners saw conditions getting worse in the next six months, up from 43 percent in October; while 19 percent reported that conditions are improving, a sharp decline from 29 percent in October. Twenty-three percent saw conditions as the same, and five percent weren't sure. The survey found 62 percent of small business owners rated the economy as poor, an increase from 55 percent in October and 30 percent rated it as fair, with eight percent calling it is good or excellent.

A majority (53 percent) of small business owners thought the overall economy was getting worse, up from 44 percent in October but still significantly lower than the 69 percent of owners who felt that way in February 2009, the last time the Watch index was this low. For November, 28 percent said the economy is getting better, down from 35 percent in October, and 16 percent saw it staying the same, and three percent were not sure.

Small business owners had an overall glum outlook on the holiday season, with just 11 percent expecting to see more business this year over last and 46 percent of them expecting less business than last year, an increase over the 40 percent who said the same in November 2008. However, 39 percent anticipate 2009 sales will be about the same as last year, and four percent said they weren't sure. The survey also revealed that for many small business owners, the holiday season is not necessarily their busiest time. A majority of owners, 56 percent, say that the holiday season falls somewhere in between being their busiest and the slowest time of year; 29 percent say this is their slowest time, and 13 percent say it is the busiest.

In November the Watch also polled 3,000 consumers on issues important to small businesses. When asked to choose from a list of places where they expect to do most of their holiday shopping, they chose discount department stores, (30 percent), department stores (18 percent), warehouse and club stores (7 percent), small retail and specialty stores (7 percent), electronics retailers (5 percent), some other type of store (9 percent) and 23 percent were not sure. These shopping-preference percentages were little changed from what they were in 2008. When it comes to the Internet, 57 percent of consumers said that they will do at least some of their shopping online this year.