Half of Business Owners Still Rank U.S. Economy as Excellent or Good

March 2007

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In spite of mixed messages from other segments of the economy, economic confidence among small business owners increased in March, driven in part by improved cash flow and rising confidence among consumer-focused merchants, according to surveys conducted for this month’s Discover^® Small Business Watch^SM.  At 117.7, the Watch rose slightly more than four points over February’s mark of 113.4.

“With uncertainty in so many sectors, it isn’t surprising that the percentage of small business owners who feel the overall economy is getting worse did increase this month,” said Sastry Rachakonda, director of Discover’s small business credit card. “However, there was also an increase in the number of owners who believe economic conditions will get better for their individual businesses in the next six months. The cash flow situation among businesses has improved over last month. We have to be on the lookout to see if the recent sub-prime woes will eventually affect small business owners in terms of cash flow and their access to capital.”

Learn more about the research methodology for the Small Business Watch.

March Key Findings

• 51 percent of the small business owners thought the economy was getting worse up from 47 percent in February.
  
• Cash flow has improved since last month. In March, 33 percent of small business owners indicated that they had experienced temporary cash flow issues, down from 39 percent in February.  
  
• 49 percent of small business owners indicated that economic conditions for their businesses were getting better, up from 44 percent in February.

Spotlight Poll: Tax Prep Takes Toll on Small Business Owners

• “Nearly three out of four small business owners feel that the complexity of tax code is a distraction. Nearly two out of five business owners struggle with finding and organizing tax documentation.” Rachakonda said. “Tax preparation and filing certainly places a burden on small business owners in America.”

Poll: Tax Code Comlexity A Big Distraction

• 77 percent of small business owners say tax preparation and documentation is either very time consuming or somewhat time consuming.
  
• 74 percent say the complexity of the tax code distracts them from focusing on the needs of their businesses.
  
• 39 percent find it very difficult or somewhat difficult to find and organize tax documentation.

Assistance from Accountants

• 73 percent of business owners will hire an accountant to do their taxes, compared to 54 percent of people who don’t own businesses who plan to hire an accountant.
• More small business owners, 56 percent, feel that accountants deserve the fees they charge, compared to 41 percent of people who don’t own businesses.
• The biggest advantage of hiring tax professionals – according to both small business owners and consumers – is having them handle paperwork. Finding more deductions finished a close second.
• 40 percent of small business owners and 30 percent of consumers expect to pay lower taxes if they hire a professional.
  
  “In spite of increasing tax software usage, both business owners and non-business owners find that accountants still add value in the tax preparation process,” Rachakonda said.

The Discover Small Business Watch is a monthly index of the economic confidence of the nation's 22 million businesses with 5 or fewer employees. Learn about our research methodology.