U.S. Small Business Confidence Index Drops 3 Points; Nationwide Concern About Economy, Regional Pessimism About Revenue Growth Drive Key Indicator South

Despite SBRB index decline, national poll indicates that hiring will improve the next 12 months among small businesses, principally in the West and Midwest, according to the report prepared in conjunction with International Profit Associates. 

NORTHFIELD, IL (September 24, 2007) –  The Small Business Research Board (SBRB) U.S. Small Business Confidence Index (SBCI) dropped to 43 during the third  quarter of 2007, a decline of three points from the previous quarter, according to a report issued here today.

Businesses in the Northeast, Midwest and the South  -- the same regions that provided the foundation for optimism in the first half of the year when the SBCI rose from 41 to 46  --  were the same regions that contributed to the third quarter decline.  Each of those regions reported decreased confidence indexes signifying their concern about prospects for improvements in their business during the next 12 months, according to the report co-sponsored by International Profit Associates (IPA).

More than 800 small businesses participated in the SBRB poll. 

The greatest loss of confidence is among businesses in the southern states where the confidence index dropped to 44 from the 50 recorded during the second quarter.  Businesses in the western states, where the SBCI reached 47.66, were the only to report improved business prospects from the previous quarter.  Businesses in the Northeast with an SBCI or 42.33 and the Midwest with an SBCI of 39.66 both were both below the national average of 43.

Nationally, 37% of the respondents said they believed the economy will improve the next 12 months which was a sharp decline from the 43% reported during the second quarter.
The owners and managers of small businesses in each of the four regions all expressed greater concern about the economy. 

The overall prospects for revenue increases for the next 12 months also contributed to the lower SBCI with 53% of the participants acknowledging they believe their sales will grow, a decrease of the 58% who said the same the previous quarter.  Business in the South and West showed the greatest concern.   Those  indicating they expect revenue growth in the southern states dropped 13 points to 54% from the 67% that reported they were looking for revenue increases during the second quarter .  In the western states, 57% said they expect revenue growth, a decrease from the 64% the previous quarter.

One improvement in the nationwide study is in the area of hiring where 39% of the participants said they expect hiring to increase during the next 12 months.   This 2% increase from the summer 2007 poll was mostly supported by businesses in the western states where 45% believe they will add to their staff levels (up from 29%) and in the Midwestern states where 38% will boost employment (up from 36%).

“When looking at small business confidence from the start of 2007 and into the third quarter, two of the three most important indicators are flat or down,” said Gregg M. Steinberg, President of IPA, based in Buffalo Grove, Il.  IPA is the largest privately-held provider of management consulting services to small and medium-size businesses in North America. 

“Comparatively, there is a three point drop from January among the small businesses which are expecting improvement in the economy while the projections for revenue growth are about the same  --  53% believing sales will improve the next 12 months versus 53.71% who thought that at the start of the year,”  Steinberg continued.

“Only increases in hiring plans in each of the three reporting periods have buoyed the SBRB Small Business Confidence Index.   Significantly, it might portend that businesses have had to and will increase hiring even though revenue is flat just to offset productivity decreases.  As a result, the real crunch will be on operational efficiency,” Steinberg added. 

The opinions and projections about the strength of the economy, revenues and hiring looking forward 12 months are the three key ingredients to determining the SBCI and providing the basis for these quarterly and annual comparisons. 

The Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.   The SBRB conducts these studies for the benefit of small business owners and managers.   The SBRB also provides opportunities for third parties to gain real time insight into the attitudes of small businesses nationwide through the independently conducted research. 

The universe of participants is developed from among small businesses across the United States.   More than 800 small business owners and senior managers participated in this SBRB poll.  The SBRB study is a voluntary survey conducted via phone and email. 

The latest information about the Small Business Research Board can be found at www.ipasbrb.com.

International Profit Associates, Inc. (IPA) is the largest privately-held provider of management consulting services to small and medium-size businesses in North America.    IPA and its more than 1,800 professionals offer a wide range of proven and innovative methodologies to help businesses grow and prosper regardless of the economic cycle.  IPA either provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at www.ipa-iba.com.

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Copyright 2007 Small Business Research Board (SBRB)

For more information about this poll, results of previous studies or other matters related to the SBRB, please contact Raymond D. Minkus, (847) 441-4294.   

Note to editors:  (Historical SBCI  text and graphic charts beginning with the winter reporting period of 2005 through the summer 2007 reporting period follows).