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Entrepreneurs’ Confidence Growing, But Still Skeptical on National Growth

Mark Marich

When asked about the state of the national economy, a majority of startup business owners do not see it growing in the next 12 months—22 percent expect it to remain pretty much the same while another 34 percent expect it to worsen. The numbers on consumer demand are similar. Not surprisingly, 63 percent said that they had no plans to hire additional employees.

However, when asked how confident they are that their business would be more profitable in the next 12 months that it is today, 83 percent were either ‘confident’ or ‘very confident’.

The latter finding represented a 4 percent rise from the previous quarterly survey for the Startup Confidence Index, 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.

The Kauffman Foundation sponsors the Startup Confidence Index surveys in conjunction with LegalZoom, the nation's leading provider of online legal documents and legal plans to young companies.

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