Riverwoods, Illinois, April 30, 2007 –
Economic confidence among small business owners
decreased in April, driven largely by a deteriorating
outlook on economic conditions for their businesses,
rising insecurity about the U.S. economy and increased
cash flow issues, according to surveys conducted
for this month's Discover® Small Business Watch
SM.
At 110.3, the Watch fell from 117.7 in March,
marking the largest month-to-month decline since
the survey's inception nine months ago.
“While
the drop in economic confidence this month spread
broadly across all categories and all business
segments, the Watch is at the same level we saw
in December, which is still generally higher than
the last half of 2006,” said Sastry Rachakonda,
director of Discover's small business credit card.
April Key Findings:
• 32 percent of small business owners
feel that economic conditions for their business
are getting worse, up from 26 percent in March.
• Small business owners who said they
have encountered cash-flow issues over the past
90 days jumped to 40 percent, up from 33 percent
last month.
• 55 percent of small business
owners feel economic conditions in the country
are getting worse, compared to 51 percent in March.
In addition, 23 percent ranked the U.S. economy
as “poor,” which is significantly higher than
March's “poor” rating of 16 percent.
•
One bright spot in the April results is the continued
increase in business development spending by small
businesses. Forty-four percent of owners plan
to increase spending, which is the highest percentage
since the Watch began in August.
Spotlight
Poll: Small Business Owners Unaffected by Stock
Market Changes • 68 percent
of respondents indicated that changes in the stock
market do not have a noticeable impact on their
business.
• 88 percent of small business
owners said the performance of the stock market
“occasionally, rarely or never” influences their
business investment decisions.
• 55
percent of small business owners indicated that
the stock market does not reflect the economic
reality they see around them on a day-to-day basis.
“This month's poll helps lend weight
to the belief that what's happening on Wall Street
doesn't always reflect economic conditions or
activity of Main Street America's small businesses,”
Rachakonda said.
Customer Insights
for Investment Advisors As part
of Discover Business Card's continuing effort
to provide valuable customer insights to key small
business segments, this month's survey polled
consumers on the use of financial advisors.
• 43 percent of consumers said they found
their financial advisor through referrals from
friends or family. Only 12 percent of consumers
found advisors through free consultations and
seminars.
• The biggest advantage of
having a paid financial advisor is the expertise
they bring to making investment decisions, according
to nearly half of the respondents.
•
The opportunity for financial advisors is large:
44 percent of consumers who invest do not use
an advisor.
• 48 percent of investors
believe that there is as much free information
available on the Internet as there is available
to paid advisors.
“Although consumers
are increasingly using free or online research
for investment information, most still feel that
the expertise a financial advisor provides is
invaluable,” Rachakonda said. “As we've seen with
earlier polls across other segments, people tend
to choose a professional based on referrals from
friends and family, which reflects the service
ethic of small business owners across America
who grow their businesses through satisfied customers.”
Risk of Running a Small Business
When all survey respondents were asked
which is riskier – investing in the stock market
or running their own business – 44 percent thought
owning a business is riskier, 37 percent thought
investing in stocks is riskier, and 18 percent
just weren't sure.
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.discoverbiz.com/watch.
For information on Discover Business Card, visit
www.discoverbiz.com.
About Discover Financial Services
LLC Discover Financial Services
LLC, a business unit of Morgan Stanley (NYSE:
MS), operates the Discover Card with more than
50 million cardmembers and the Discover Network.
Discover Financial Services also operates the
PULSE ATM/debit network, which serves over 4,400
financial institutions and includes nearly 260,000
ATMs, as well as POS terminals nationwide. For
more information, visit
www.discovercard.com,
www.discovernetwork.com
or
www.pulse-eft.com.
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.
Media Contacts
Jon Drummond
Discover Financial Services
224-405-1888
jondrummond@discoverfinancial.com
Daniel Delson
Robinson Lerer &
Montgomery
646-805-2036
dmd@rlmnet.com