Economic Optimism Dips Again for Entrepreneurs

What a difference six months can make, especially to small business owners. While entrepreneurs were feeling more confident and optimistic in December 2010, the tide has again changed, according to the latest Mid-Year Economic Report from the National Small Business Association.

The report found 88% of small businesses are anticipating a flat or recessionary economy—the survey's highest point in two years.   And 64% of small business owners feel confident about the future of their business, down from 66% in December 2010. What's worse is that 40% said they do not anticipate growth opportunities over the next year.

The report was conducted online by surveying 400 small business members of the NSBA, representing every industry in every state in the U.S.

Molly Brogan, VP of public affairs at the NSBA, said economic uncertainty is the issue small business owners are struggling with the most. These feelings have only been made worse by the debt ceiling debate that raged on for weeks in Washington.

"There is still not a long-term solution on the table," Brogan said. "I don't think small business feels any progress has been made."

The deficit came in as a top concern for 30% of respondents, ranking fifth overall. Other top concerns were economic uncertainty, declines in consumer spending, health insurance costs and regulatory burdens, the report found.

Another area of concern is consumer spending on health insurance benefits. The report found 32% of small business owners are basing their employment decisions on these costs. This is up from 24% in the past six months. Additionally, 44% of small businesses that provide health insurance are experiencing a premium increase of at least 11%.

"They're not hiring because of the costs," Brogan said. "There has been a lack of understanding on the new law and how it will impact small business. I do think small businesses are understanding more and learning about the law, but with that being said, there is still a lot of concern."

The report is not all doom and gloom, Brogan noted, citing slight increases in employment over the past 12 months. When projecting employment growth over the next 12 months, 17% of respondents projected growth, up from 13% six months ago.

There was also an increase in the number of businesses relying on bank loans, she said, another positive sight.

"There is an ongoing slow process [for] a growing number of [entrepreneurs] that can get financing for their small businesses," she said. "That is a reassuring point of the survey."