DISCOVER® SMALL BUSINESS WATCHSM:
SMALL BUSINESS ECONOMIC CONFIDENCE DROPS TO NEW LOW;
NEARLY 8 IN 10 SAY ECONOMY IS GETTING WORSE
Concerns About the U.S. Economy and Economic Conditions for Small Businesses
Hit Record Levels
POLL: INDEPENDENCE, FLEXIBILITY ARE TOP MOTIVATORS FOR
STARTING A SMALL BUSINESS
Most Owners Would Pass Up More Money to Work for Someone Else
Riverwoods, IL, June 30, 2008 – After a brief rebound in May, economic confidence
among small business owners dropped to a record low in June as the number of those
who think the U.S. economy is getting worse expanded to nearly 80 percent. The
Discover® Small Business WatchSM plummeted in June to 71.8, down 10 points from 81.8
“We know this sector is self-reliant and independent to a large degree, so in spite of their
view of the overall economy, they feel less concerned about the economic conditions that
affect their own businesses closer to home,” said Ryan Scully, director of Discover’s
business credit card.
Confidence indicators were down in June in every category of the Watch survey,
including cash flow issues and plans to spend on business development.
“With prices rising, especially gas and food, just about everybody is feeling the squeeze,”
Scully said. “People are starting to change their habits and cut back. For small business
owners who are seeing profits go down as a result, that means they have less to invest in
finding new business.”
June Key Findings:
Nearly eight out of 10 small business owners, 79 percent, think the U.S. economy
is getting worse – an increase from 71 percent in May and the highest level
recorded since the inception of the Watch in August 2006.
53 percent of owners say that economic conditions for their business are getting
worse, compared to 47 percent in May.
58 percent rated the economy as poor, an increase from 50 percent in May.
42 percent say they have experienced cash flow issues over the last 90 days, an
increase from 39 percent in May.
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75 percent of owners will be decreasing or making no changes in what they spend
over the next six months on business development activities such as advertising,
inventories, and capital expenditures. Forty-five percent plan to decrease
spending, 30 percent are making no changes, and 23 percent plan to increase
8 percent of owners have plans to hire in the next few months, while 79 percent
are making no changes and 10 percent plan to lay off workers.
American Dream Poll: Is It Still Within Reach?
Only 40 percent of the 4,000 consumers polled by the Watch people think the
American Dream is still a possibility, 11 percent aren’t sure, and 48 percent said
the dream is dead. However, if you’re going to try, 58 percent of consumers say
owning a small business is one way to go, while small business owners are more
certain: 71 percent of them feel like they have a doorway to prosperity and a
better life for their families.
Motivation Poll: Independence and Flexibility Drive Most Owners
Independence and flexibility continue to be the main reasons behind the choice to start a
small business. Fifty-two percent of owners say they started a small business to have
more flexibility with their time or to be more independent, an increase from 46 percent in
2007. Only 12 percent cited making more money as the primary reason for starting their
own business, a decrease from 19 percent a year ago.
“The long hours and risks of running a small business are trade-offs most owners are
willing to make for the freedom and flexibility that comes with working for themselves,
even if it might mean making less money,” Scully said.
59 percent of owners would turn down a job working for someone else, even if
offered more money than they currently make. This is down slightly from 61
percent who felt this way in 2007.
66 percent of small business owners agree that it is riskier to run a business than
to work for a large company, although 44 percent said that starting their own
business turned out to be, in retrospect, less risky than they first believed.
When asked about the biggest challenge facing their business, 31 percent cited
finding new business and 19 percent cited managing cash flows.
Nearly half of small business owners, 46 percent, originally financed their small
business with personal savings.
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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 employ 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 1,000 small business owners. It
is commissioned by the 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 of 2006.
In addition to generating the index, the Small Business Watch surveys small business
viewpoints on key business drivers, and also surveys 4,000 consumers to gauge purchasing
behavior and attitudes towards small businesses. For past results and small business survey
data, visit www.discovercard.com/business/watch. For information on Discover Business
Card, visit www.discovercard.com/business.
About Discover Financial Services
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.
The company operates the Discover Card, America's cash rewards pioneer. Since its
inception in 1986, the company has become one of the largest card issuers in the United
States. Its payments businesses consist of the Discover Network, with millions of merchant
and cash access locations, and PULSE, one of the nation's leading ATM/debit networks. For
more information, visit www.discoverfinancial.com.
Discover Financial Services
Robinson Lerer & Montgomery
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