What’s Driving Record-High Small Business Optimism?

Date: September 17, 2018

Thanks to economic policy changes, small business owners are making good on their plans for growth.

Small business optimism is off the charts, and that sentiment isn’t only about hopes for the future. It reflects the real steps small business owners across the nation are taking to grow their companies.

NFIB’s Small Business Optimism Index reached a record high of 108.8 in August, shattering the previous record of 108 in July 1983. While optimism has been on the rise since December 2016, the August index shows small business owners’ expectations have become a reality.

The August index was shaped by real signs of small business growth and investment, such as job creation plans, job openings, capital spending plans, inventory plans, and earnings. In months prior, components relating to expectations for growth had a stronger influence on the index’s performance: inventory satisfaction, expected business conditions, sales expectations, expected credit conditions, and whether now is a good time to expand.

NFIB member Chris Ellis said that he’s the most optimistic he’s been in 20 years of business. Ellis owns Helping Hands Healthcare in greater Cincinnati, Ohio. The company provides in-home healthcare services and employs 200 part-time and full-time staff. Ellis said the election of President Donald Trump and the passage of the Tax Cuts and Jobs Act gave him the confidence boost to make much-needed investments in his employees and his business.

A key game changer for Ellis is the section 199A deduction in the Tax Cuts and Jobs Act—the 20 percent small business deduction for pass-through entities. “Twenty percent comes off of my bottom line at the end of the day, which is significant,” Ellis said. “As soon as I saw that, I increased the starting wage for new employees by 50 cents per hour.”

That 50-cent-per-hour increase—significant for his part-time field workers—has helped him attract more applicants during a nationwide labor shortage in home healthcare workers, he said. He also gave raises to full-time staff and upgraded IT equipment.

His reinvestment in his business didn’t stop there: Ellis purchased an office condominium that he had been leasing for 19 years as a second location for his company. He’s now setting his sights on expanding his market to the Dayton area. “It’s given me confidence,” Ellis said. “Before, I didn’t have the confidence.”

Ellis’ actions echo what NFIB research has uncovered: Small business owners aren’t just optimistic—they’re taking action on their plans for growth.

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