Why is Small Business Optimism Skyrocketing?

So far, 2018 has been the year of the small business, and it looks like it might stay that way.

According to a survey released this week by the National Federation of Independent Business, optimism among small business owners is skyrocketing.

The Small Business Optimism Index, as it’s so originally named, is made up of ten components.

Six of those increased in January, including “plans to increase employment,” and and “plans to increase inventories.” The survey produced its highest readings since it began collecting data 45 years ago.

The optimism has already affected operations, with a third of participants in the survey looking to expand their business, another third reporting job openings, and 31% compensating workers at a higher rate than in the previous year.

So, why all the fuss? What’s got small businesses so pumped?

Among other factors, small business leaders are citing tax cuts, regulation downgrading, and a upward economic trend for their positivity.

These issues are multi-layered in themselves. To draw them out a bit, we’re going to dive into the reasons why small businesses are confident.

Tax Cuts

Despite its opponents, the Trump Administration’s Tax Plan is a welcome gift to many small businesses.

The tax plan slashes the corporate tax rate from 35% to 20%, and brings the “pass-through” rate for small businesses down from 39.6% to 25%. Whichever bracket your business falls into, you’re probably paying less come tax season.

More money means more to spend, and small business owners are spreading the wealth widely.

Employees of small businesses are seeing 401k hikes, wage increases, and bonuses. AT&T announced that they were providing a $1,000 bonus to 200,000 employees at the tail-end of 2017, and many small businesses are doing the same.

More money also means more investment, and further expansion. Though they may not save enough to go overseas, small businesses around the country are scaling-up operations, hiring new employees, and opening new locations in the wake of the Trump tax plan.

But, the tax plan is only the most recent reason for small business optimism, and the most immediately satisfying.

While a thicker wallet is always great, reducing impediments to small business operations may have longer-lasting, wider-reaching effects.

Regulation Slashing

Regulatory freedom is always a sticking point for small businesses.

The more regulations imposed on a product or industry, the harder it is for businesses and companies to operate on a domestic, but especially on a global scale.

You’ll probably remember the grand gesture of Trump showing off the 20,000 pages of regulations from 1960 compared to the 185,000 of today.

Since then, Trump has worked to cut the number of regulatory measures to below the amount imposed in 1960, calling it the “largest ever cut, by far” in this area.

Not all affected small business, and there were some major criticisms coming out of the deregulation plan.

But, it’s undeniable that the slash opened opportunities for many small business owners previously tangled up in red.

Lessened regulations have clearly increased the optimism of small businesses moving forward in 2018, and for good reason. According to Steve Hanke, Forbes contributor and professor of applied economics at Johns Hopkins University, there’s a “positive relationship between regulatory freedom (ease of doing business score) and prosperity (GDP per capita).”

While that may seem a bit broad, it’s easy to see how these developments in deregulation have fostered optimism in the small business community.


This one doesn’t come from Washington.

Technological innovation is making it increasingly easy for small businesses to flourish. It can make operations easier at home, but the big gain for adopting new technologies is the ability to expand abroad.

According to the survey, 32% of small business owners said that now was a good time to expand, as the economic and business climate is considered the most favorable in decades.

While expanding globally is always a challenge, it becomes much more reasonable when small businesses can automate operations, lower costs, and secure their assets.

If decreasing regulation and taxes are the blueprints of expansion, technology is the catalyst.

As these technologies become more affordable, and as companies make more money to spend on them, confidence in small business’ ability to expand increases dramatically.

From importing and exporting to automating your emails, technology makes small business operations easier, faster, and more secure.

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