New research from Wells Fargo reveals that small business owner optimism has softened a bit for their businesses and future expectations. But respondents indicated attracting new customers continues to be a key challenge, as many owners share plans of how they will garner more business this year.
Small business optimism softens in Q1 2020
The latest Wells Fargo/Gallup Small Business Index shows a 10-point decrease in overall optimism. One indicator underscoring this dip in optimism is the finding that fewer small business owners (24 percent) are planning on adding jobs or positions at their companies this year—lower than last quarter. However, more than 80 percent of owners said their current financial situation is somewhat good or very good, and 84 percent said the same would be the case 12 months from now.
Additionally, 64 percent of business owners said they expect their revenues over the next 12 months to increase a lot or a little and 81 percent say their company’s cash flow will be very good or somewhat good over the next 12 months.
Attracting new business remains a key challenge
The survey also focused on owner sentiment pertaining to attracting customers and new business—a top challenge that has been highlighted consistently each quarter. When asked if business owners have more trouble attracting new customers or retaining existing customers, 82 percent said attracting new customers is the bigger problem. The biggest challenges business owners face when trying to attract new business included the basics of finding and then retaining new customers, creating the right mix of advertising and marketing, dealing with competition for customers, keeping prices low, customer service and staffing, and having enough money to run the business effectively.
When asked to think ahead to the next 12 months and what actions they would take in order to attract and retain customers, business owners highlighted increasing networking opportunities (65 percent), obtaining customer feedback (52 percent), increasing social media presence (51 percent), updating their website (49 percent), and increasing spending on advertising and marketing (38 percent).
User reviews becoming more critical
The survey focused on the growing importance of online user reviews of their business. Over half of small business owners (53 percent) have access to online user reviews and 69 percent of those business owners say these user reviews are extremely or very important to their business. Two-thirds of owners with access to online reviews say they encourage their customers to post positive reviews, and about the same percentage say they post responses to online reviews where necessary.
“Digital marketing now can play a major role for small business success—allowing them to engage with customers directly through social media, get real-time customer feedback, and build their online reputation with customer reviews,” said Linda Soldatos, head of Wells Fargo’s Small Business Marketing, in a news release. “Investment in managing their online presence can have a great payoff for small businesses in attracting and retaining customers.”
Other top challenges
Technology was cited as the second highest-ranked challenge, at 10 percent this quarter, including cybersecurity issues and keeping up with the latest technology and computer updates. Taxes were also rated as a top challenge at 10 percent.
Results for Wells Fargo/Gallup Small Business survey are based on web interviews with 600 small business owners, conducted during the period January 3-10, 2020., Beginning in Q2, 2019, interviewing formally transitioned from outbound phone data collection to a national small business web opt-in panel provider.