Rates of change illustrate small business optimism [WSJ/Vistage Jan 2024]

Small businesses finished the year with a surge of positivity, and this trend continued, albeit with a bit of caution, in January. The WSJ/Vistage Small Business CEO Confidence Index reached 90.0, marking the highest level of the past 12 months. While some elements of the index showed an increase, others kept the overall confidence in check. Finding the right balance remains a challenge for small businesses.

Looking deeper into the six components making up the WSJ/Vistage Small Business Index, those supporting the rising trend are growing economic optimism — alongside decreasing pessimism — and improved profit expectations over the next 12 months. These components show the greatest rise when looking at the 12-month average compared to the 12-month average a year ago, also known as the 12/12 rate of change.

Components that are not rising as quickly when looking at the 12/12 rates of change include revenue expectations, workforce expansion plans and fixed investments. Revenue expectations, while among the strongest we have seen in some time, do not show the same rising trend as other components, likely because they rebounded faster from the lows suffered during the pandemic.

Despite waning pessimism, the economy presents challenges

To better understand the challenges shared in the Q4 Vistage CEO Confidence Index report, we asked small businesses to rank their top 3 challenges in this month’s survey. Over half (53%) of small businesses indicated economic impacts — including market volatility, inflation and interest rates — as their top challenge. Talent acquisition and retention shortly follow (and foreshadowed in last month’s data), illustrating that 44% of small businesses reported hiring challenges continue to impact operations.

Wages top small businesses’ list of inflationary pressures

Wages sit at the intersection of the economic impacts brought on by inflation, talent acquisition and retention. A majority of small businesses (59%) cited labor costs as the primary cause of inflation affecting their business. With last year’s increases driving even higher wages this year, the cost of human capital will continue to plague small businesses as they strive to hire and retain the talent needed to meet demand. It will be important for small businesses to evaluate the productivity of the team, let go of poor performers and accelerate digital transformation to enable their staff with technology.

The January WSJ/Vistage Small Business CEO Confidence Index was informed by 430 leaders of small businesses who represent respondents reporting annual revenues of $1-20 million in the January WSJ/Vistage Small Business survey conducted January 8-15, 2024.

January highlights

• Current Economy: While 23% of small businesses report that the U.S. economy has improved compared to one year ago, 36% report that it worsened, an 8-point improvement from last month.
• Future Economy: The proportion of small businesses expecting the economy to improve stayed stable at 22%, and the proportion that expected it to worsen has declined by 20 points over the past two months.
• Revenue projections: 60% of small businesses expect increased revenues in the next 12 months, a slight decline from last month but remaining among two-year highs.
• Profitability projections: The proportion of small businesses that expect increased profits in the next 12 months grew faster than those expecting increased revenues. More than half (52%) expect increased profits, while 15% expect them to decline.
• Fixed investment plans: Nearly one-third (32%) of small businesses plan to increase fixed investments, while 14% plan to reduce spending in the next 12 months.
• Workforce expansion plans: Less than half of small businesses (48%) plan to expand their workforce in the next 12 months, while 45% will keep their workforce stable. Just 7% plan to reduce the size of their workforce.

For deeper insights and to explore the complete dataset of the January 2024 WSJ/Vistage Small Business data, visit our data center or download the infographic.

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