Hub business wary of future

While small business gurus continue to sing the praises about how U.S.’s small companies are leading the way to economic prosperity, a new monthly report — finds that confidence is waning. That’s a cause for worry.

“Waning confidence” is a far cry from the panic that reigned at the start of the decade, but the report suggest that many business owners are starting to wonder if the post-recession peak already has occurred. This presents a different picture on the street than most small business data suggest.

Author: Courtesy of Thumbtack Small Business Friendliness SurveyAccording to the most recent Thumbtack Small Business Friendliness Survey, Boston small business owners continue to have a more positive view of the current economic situation compared to the last few years, but that positive outlook is beginning to level off.

It also highlights the strength of the Thumbtack Small Business Friendliness Survey. With 90 percent of the small business in the U.S. having less than five employees, Thumbtack’s focus differs from many other small business reports that often target small- and medium-sized businesses — that is, firms with anywhere from 50 to several hundred employees. By focusing on the 90 percent of those with a handful of employees, Thumbtack can better lay claim the nation’s economic pulse.

Thumbtack is a digital enterprise founded in 2009 for finding and hiring local professionals. It has conducted small business surveys since 2012. Thumbtack has raised $150 million in venture capital from giants such as Sequoia Capital and Google, which has enabled it to issue its small business reports on a monthly basis.

Early findings reveal the paradox of what is really going on with American small business. One the one hand, things have improved since the recession, and most numbers continued to rise. On the other, the future is a cause of concern, suggesting that growth may be on the verge of flatlining.

“Generally, across all the businesses we have looked at, there has been a nice recovery over the last few years,” said Jon Lieber, chief economist at Thumbtack. “But this year there was an overall slowdown around the country.”

Survey responses

Thumbtack’s methodology for assessing economic sentiment involves querying small business owners about revenue, profitability and business conditions. The survey responses — Thumbtack has collected over 2,000 in Boston — then are used to create a weighted index that demonstrates economic sentiment on a scale from 0 to 100, with anything above 50 being positive and anything below 46 being negative.

Boston has jumped around a bit in how it ranks on economic sentiment compared to the rest of the country, but notably it continues to hover in the bottom half of the cities surveyed.

In March, Boston ranked 51 out of 55 cities; in April it jumped to 38; in May it was 40; and in June it moved up to 27.

However, according to Lieber, the chief concern expressed by Boston small business owners is uncertain economic conditions, more so than what their national counterparts say.

Lieber acknowledges that Boston survey results over the next few months will be telling.

“They may feel happy about the current situation but as for the future — they are feeling a little more pessimistic,” he said.

In addition to uncertain economic conditions, other things that worry Boston small business owners include competition from big businesses overseas, poor sales numbers, access to credit and consumer confidence.

Nationally, the Northeast attitudes about the future seem to be more at odds than those held in other regions.

Thumbtack found that southern small businesses generally are more positive about economic conditions than their counterparts.

A national trend

The most recent national survey, out last week and covering June, found that, in general, U.S. small businesses are less optimistic about the economy — the third month in a row for such a sentiment. Nationally, in addition to ranking uncertain economic conditions as the main concern, small business owners had some of the same business worries as those in Boston, including poor sales, competition from big businesses overseas and consumer confidences.

However, access to credit is a bigger concern of small business owners in other parts of the country than it is in Boston. This likely is a reflection of Massachusetts’ status as the top state for low-dollar small business loans.

One intriguing finding of the recent Thumbtack survey involves hiring data, which appears to contradict U.S. Department of Labor statistics and continual assertions from the U.S. Small Business Administration that small businesses continue to drive new job growth.

In June, Thumbtack’s national survey revealed that 70 percent of small businesses reported no hires in the last three months; in Boston, 72 percent reported no hires during that same period.

As for accuracy, Lieber believes the more granular the surveys, the more accurate the picture. “Quarterly data can be tough for trends,” he said. “With monthly data you get a more frequent read on the economy, which will be helpful.”