Small business owners are experiencing less optimism toward their businesses when looking to the future, according to the latest Wells Fargo/Gallup Small Business Index.
Respondents also said attracting new customers is one of the biggest challenges they face.
According to Pete Dontas, New Jersey market executive for Wells Fargo Commercial Banking, these results mirror exactly what his team is seeing in New Jersey.
“When I am out in the market talking to New Jersey business owners and executives, many definitely tell me that attracting new customers is a challenge. In most cases, they are exploring new ways to market themselves to customers using digital channels — and in some instances even utilizing artificial intelligence,” Dontas said.
Small business optimism softens in Q1 2020
The survey, which was conducted from Jan. 3-10, showed a 10-point decrease in overall optimism. This is due in part to fewer small business owners (24%) anticipating adding new positions at their companies this year.
In terms of finances, more than 80% of owners said their current financial situation is in good standing (somewhat good or very good) and 84% said the same would be the case 12 months from now. Additionally, 64% of business owners expect their revenues to increase this year by a lot or a little and 81% said their company’s cash flow will be very good or somewhat good over the year.
When asked about the economy, 67% rated it as either good or excellent, representing a 4 point increase from Q3, with approximately a quarter of respondents saying the economy affects their business a great deal.
“It’s promising to see that, in general, business owners remain optimistic,” Elli Dai, head of small business and personal lending group at Wells Fargo, said. “As we look ahead to the rest of the year, it’s helpful to know what’s impacting their businesses and the decisions they are looking to make. Only when we understand our customers can we better support their financial goals and continued growth.”
Attracting new business is top of mind
When asked if business owners have more trouble attracting new customers or retaining them, 82% said attraction is the bigger issue. Top challenges include the basics of finding and then retaining new customers, creating the right mix of advertising and marketing, dealing with competition, keeping prices low, customer service and staffing, and having enough money to run the business effectively.
Thinking ahead, actions business owners are anticipating to take in order to attract and retain customers over the next year include networking opportunities (65%), customer feedback (52%), increasing social media presence (51%), updating their website (49%) and increasing spend on advertising/marketing (38%).
The survey focused on online user reviews and the growing importance it has on businesses. More than half of small business owners (53%) said they have access to online user reviews and 69% of those owners said the reviews are extremely or very important to their business.
“Digital marketing now can play a major role for small business success – allowing them to engage with customers directly through social media, get real-time customer feedback, and build their online reputation with customer reviews,” Linda Soldatos, head of Wells Fargo’s Small Business Marketing, said. “Investment in managing their online presence can have a great payoff for small businesses in attracting and retaining customers.