Study: Economy takes toll on small-business owners

June 25, 2008

San Francisco—With rising gas prices and a looming recession, optimism among small-business owners is waning, with more than one-third saying their personal financial situation is getting worse, according to the latest Well Fargo/Gallup Small Business Index sight.

The survey found that half of those polled said they’ve postponed a major purchase in the past three months, and nearly as many (44 percent) said they’ve reduced the amount of money they’ve deposited into savings, checking or CD accounts. Thirty-one percent said they’ve reduced the amount they contribute to a retirement account.

“In this economy, I’ve needed to cut back on both my personal and business spending,” Laine Caspi, owner of Parents of Invention in Granada Hills, Calif., uttered in a media release. “At times, I need to forgo material purchases so that I can put more money toward business expenses.”

Small-business owners are also concerned about not having enough money for the future. Seventy-five percent have concerns about paying for gas. More than half (51 percent) are worried they will not have enough money for the next 12 months’ regular medical and dental expenses, and almost half (46 percent) fear they will not have enough money to pay for unforeseen medical emergencies.

“It has been a challenging year for small businesses, requiring business owners to rethink their expense and cash flow priorities,” Rebecca Macieira-Kaufmann, head of Wells Fargo’s small-business segment, said in the release. “What’s determining now, as in any economic environment, is that business owners maintain strong financial-management practices and plan for the future.”

The Well Fargo/Gallup Small trade Index survey was conducted nationwide via telephone interviews with 600 small-business owners between April 2-16. The margin of sampling error is +4 percentage points.