While a majority of startup business owners do not believe the economy will grow in the next 12 months, 83 percent are nonetheless confident that their own profits will, according to the fourth-quarter Kauffman/LegalZoom Startup Confidence Index. The findings are based on 693 responses to a nationwide, September 2012 survey. The Startup Confidence Index is conducted quarterly by the Kaufman Foundation to gauge entrepreneurial confidence. The latter finding represented a 4 percent rise from the previous quarterly survey, conducted in July 2012, and was the highest confidence level expressed by entrepreneurs in any of the 2012 quarterly surveys.
Forty-one percent of entrepreneurs reported being very confident in future profitability in the fourth-quarter survey, compared to 39 percent in the third quarter. The number of respondents who were somewhat confident in future profitability rose from 40 percent in the third quarter to 42 percent in the fourth-quarter survey.
Sixteen percent of small business owners applied for loans or lines of credit in the last year, a number that remained unchanged from the previous quarter, but of these applicants, 14 percent more had their loans approved than in the previous quarter, a significant jump.
The youngest entrepreneurs – those 18 to 30 years old – exhibit the greatest optimism, as they did in the third-quarter survey. Among this group, 93 percent were confident or very confident that their businesses would become more profitable in the next 12 months than they are today. This number is considerably lower than in the previous quarter, however. Young people still show a rise in confidence from the start of the year, but from the third quarter to the fourth, there’s a marked drop-off.
“We believe these findings are important because entrepreneurial confidence could be seen as something of a leading indicator, as new and young businesses prepare to lead the next economic expansion,” said Dane Stangler, director of research and policy at the Kauffman Foundation.
Expectations for the U.S. economy rebounded from the July 2012 quarterly survey. Forty-four percent of startup owners now believe the economy will improve over the next 12 months, as compared to just 32 percent in the third-quarter survey, 38 percent in the second-quarter survey and 38 percent in the first-quarter survey.
“Over the last four quarters of tracking entrepreneurial confidence, the one number that has grown steadily is ‘intent to hire.’ It is encouraging to see it at its highest rate yet this year,” said John Suh, CEO of LegalZoom.
Nearly 40 percent of startup owners said they plan to hire additional employees in the next 12 months, which is the highest percentage reported in any of the 2012 quarterly surveys.
Entrepreneurs’ outlook for consumer demand also is becoming more optimistic. In the most recent fourth-quarter survey, 45 percent said they expect a moderate to significant increase in consumer demand in the next 12 months – 10 percent more than in the third-quarter survey.