Small business confidence gains more momentum [WSJ/Vistage Oct 2024]

For the third consecutive month, small business confidence has increased as the October WSJ/Vistage Small Business CEO Confidence Index reached 96.5, its highest level since February 2022.

September’s half-point interest rate cut, coupled with more expected cuts, is contributing to small businesses’ economic optimism. Other signs of economic thaw include a strong jobs report and a slowing inflation rate.

Looking ahead over the next 12 months, small businesses are not only more optimistic about the U.S. economy, but a growing proportion expect increased revenues.

Revenue and profit projections remain strong

While small businesses might experience slower growth, an increasing proportion (66%) expect improving revenues in the next 12 months, the highest since April 2022. Meanwhile, only 7% expect revenue declines. Slowing inflation has had positive effects on profitability.

Indeed, 53% of small businesses expect increased profits, on par with the positive trend that began last month. The proportion expecting decreased profits also changed by 2 points; in combination, this provides the best profitability scenario since August 2021.

Take advantage of lower costs

Across the board, small businesses are finally seeing costs come down. The inflation rate has reached 2.4% compared to 3.7% last year. The first interest rate cut will improve cash positions for many small businesses; according to last month’s data, 22% will actually see impacts this calendar year.

At an event for Vistage members held in Omaha on October 22, Michael Feuz, an economist and speaker from ITR Economics, says he expects inflation to return in 2026. His recommendation? CEOs should invest in their businesses in 2025 to capitalize on the sweet spot where growth begins and inflation has yet to catch up.

Talent is one investment that small businesses should consider. Feuz also advised that management lock in talent at lower wages as competition will heat up with the growth cycle.

Small businesses contribute to strength in U.S. hiring

The Bureau of Labor Statistics’ September Jobs report reflected last month’s jump in the proportion of small businesses planning to expand their workforce in the next 12 months, which saw a significant surge in job additions. More than half (52%) of small businesses plan to add personnel over the next 12 months.

According to 37% of small businesses, hiring is easier for them now than at the start of the year. In addition, wage pressures may lessen, according to John Kookootsedes, CEO at IAG Insurance Services in Ladera Ranch, California: “There’s been a slight easing with more candidates looking for new opportunities. This has also lessened the upward pressure on salaries.”

While budgets for additional headcount might not be available until next year, small businesses should take advantage of their cash position now to hire and fully train new talent to ensure they are prepared for the predicted acceleration of growth in 2025.

The state of hybrid work for small businesses

Another opportunity some small businesses may have for hiring and retention is their ability to accommodate post-pandemic demands for remote or hybrid work options. Currently over half of small businesses have some percentage of their workforce that is hybrid, while 35% have fully on-site employees, and 14% report their workforce is fully remote.

Delving into those with a hybrid model, in-person work days vary. A combined 45% are in person either 2 or 3 days a week, with nearly a quarter spending 2 days a week in the office and 21% reporting their workforce spends 3 days a week. In analyzing the open-ended responses, it is clear that for small businesses, hybrid policies vary by team, department workforce, manager and even employee discretion.

While nearly two-thirds of small businesses that have hybrid workers say they do not anticipate any changes in terms of how often employees are required to work in the office, they may benefit from adding more consistent policies to their plans. When asked how they would support remote or hybrid employees in the coming year, small businesses plan to improve technology and related security and increase their travel budget to allow for in-person meetings that might take place at a higher frequency.

October highlights

The October WSJ/Vistage Small Business CEO Confidence Index was calculated from a survey of small business leaders conducted between October 7 and 14, 2024. The results reflect insights from 427 respondents representing companies with annual revenues of $1-20 million.

• Current economy: The proportion of small businesses that believe the economy has improved compared to last year increased to 23%, while 31% think it is worse — an 8-point decrease in pessimism.
• Future economy: More than one-third (36%) of small business leaders expect the economy to improve over the next year, while the percentage that expects it to worsen fell 8 points from last month to 14%.
• Revenue projections: Two-thirds (66%) of small businesses expect increased revenues over the year ahead, and just 7% expect a decline. This continues an improvement from last month, when it was the healthiest proportion since April 2022.
• Profitability projections: 53% of small businesses expect increased profits in the next 12 months, while just 14% expect profits to decline.
• Fixed investment plans: 36% of small businesses plan to increase fixed investments over the next 12 months, while 13% plan to reduce spending.
• Workforce expansion plans: More than half of small businesses (52%) plan to add personnel over the next 12 months.

To explore the full October 2024 WSJ/Vistage Small Business dataset, visit our data center or download the infographic.

Our November survey will take place November 10-17, capturing small business sentiment post-election.

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