Cash Flow Concerns Increase, Economic Conditions Worsen
EXPECTATIONS ARE LOW FOR THE HOLIDAYS
46% of Small Business Owners Expect Lower Sales Over 2008
RIVERWOODS, Ill.--(BUSINESS WIRE)--Nov. 30, 2009--
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 Discover®
Small Business WatchSM index fell 12 points in November
to 76.5 from 88.5 in October.
“Fading confidence among small business owners could be tied to their
low expectations for the upcoming holiday season, as 46 percent are
forecasting decreased sales and 39 percent are expecting to hold the
line,” said Ryan Scully, director of Discover's business
credit card. “However, we saw drops in optimism across the board, so
it’s hardly just one factor causing the concern.”
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.
52 percent of owners say they have experienced cash flow issues in the
past 90 days, up from 44 percent in October. Forty-one percent of
owners say they have not experienced cash flow issues, which is the
lowest response in this category since the Watch began. The remaining
6 percent said they weren’t sure.
53 percent of small business owners see conditions getting worse in
the next six months, up from 43 percent in October; while 19 percent
report that conditions are improving, a sharp decline from 29 percent
in October; 23 percent see conditions as the same, and 5 percent
62 percent of small business owners rate the economy as poor, an
increase from 55 percent in October; 30 percent rate it as fair, and 8
percent say it is good or excellent.
53 percent of small business owners think the overall economy is
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 say the economy is getting better, down from 35 percent in
October; 16 percent see it staying the same, and 3 percent are not
Only 11 percent of Small Businesses Expecting Increased Sales This
Small business owners have a glum outlook on the holiday season: Only 11
percent expect to see more business this year over last, while 46
percent of them are expecting less business than last year, an increase
over the 40 percent who said the same in November 2008; 39 percent
anticipate 2009 sales will be about the same as last year, and 4 percent
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.
Discount Department Stores Still Most Popular for Holiday Shopping
This month 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 the following:
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
Not sure, 23 percent
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.
Squeeze on Credit
Twenty-four percent of small business owners say that they extend credit
to customers, and 73 percent of those that extend credit say that they
have customers who have delayed or asked to delay a payment in the last
three months. This is largely unchanged from December 2008 when 25
percent said they were extending credit, and 72 percent said that they
had customers who delayed or asked to delay a payment.
Helping Out the Little Guy
What would you do if that convenient corner market or neighborhood
hardware store near you suddenly closed? Did you ever consciously make a
point to use a small business in the hope that your patronage would help
keep it open? If so, you’re in good company – 68 percent of consumers
say that they have made purchases at a small business in an effort to
keep it from closing.
The views and opinions expressed by small business owners and
consumers who participate in the Small Business Watch survey are their
own and do not necessarily reflect those of Discover
Financial Services or its affiliates.
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. It is commissioned by
Discover Business card, which strives to offer the best business credit
card for American small businesses, and is conducted by Rasmussen
Reports, LLC (www.rasmussenreports.com),
an independent survey research firm. The numeric index is calculated by
assigning values to responses to a set of six consistent questions. The
base value of the Watch was established at 100.0 based on surveys
conducted in August 2006. In addition to generating the index, the Small
Business Watch surveys small business owners every month on key issues,
and polls 3,000 consumers four times per year to gauge purchasing
behavior and attitudes towards small businesses. For past results and
survey data, visit www.discovercard.com/business/watch.
For information on Discover Business card, visit www.discovercard.com/business.
Discover Financial Services (NYSE: DFS) is a leading credit card issuer
and electronic payment services company with one of the most recognized
brands in U.S. financial services. Since its inception in 1986, the
company has become one of the largest card issuers in the United States.
The company operates the Discover card, America's cash rewards pioneer,
and offers student and personal loans, as well as savings products such
as certificates of deposit and money market accounts. Its payments
businesses consist of Discover Network, with millions of merchant and
cash access locations; PULSE, one of the nation's leading ATM/debit
networks; and Diners Club International, a global payments network with
acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.
Source: Discover Financial Services
Discover Financial Services
Jon Drummond, 224-405-1888
Lerer & Montgomery
Amanda Bonzo, 646-805-2060