April 30, 2007


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 WatchSM. 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 (, 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 For information on Discover Business Card, visit

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, or

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

Daniel Delson
Robinson Lerer & Montgomery