Entrepreneurs Economic Confidence Slipping

Release Date: 7/31/2012

Media Contacts:
Johanna Namir, 323-337-0022, jnamir@legalzoom.com, LegalZoom
Rossana Weitekamp, 516-792-1462, rossana@weitekamp.com
Barbara Pruitt, 816-932-1288, bpruitt@kauffman.org, Kauffman Foundation

Entrepreneurs' Economic Confidence Slipping, Third-Quarter Kauffman/LegalZoom Startup Confidence Index Shows

But younger entrepreneurs are notably more confident in future profitability

(KANSAS CITY, Mo.) July 31, 2012 —According to the third-quarter Kauffman/LegalZoom Startup Confidence Index, released today by the Ewing Marion Kauffman Foundation and LegalZoom, expectations for the U.S. economy declined overall, but there is a significant optimism gap between older entrepreneurs and those between the ages of 18 and 40.

Almost 40 percent of startup owners now believe the economy will deteriorate over the next 12 months, an increase from 36 percent in the second-quarter survey and 31 percent in the first-quarter survey. Entrepreneurs' who were somewhat confident in future profitability fell from 43 percent in second quarter to 40 percent in the third-quarter survey, and those who lacked confidence in improved profitability edged up from 18 percent to 21 percent.

However, 98 percent of the 18- to 30-year-olds and 83 percent of the 31- to 40-year-olds are confident or very confident that their businesses will realize greater profitability in the next 12 months.

"Entrepreneurs require persistence and fortitude," said John Suh, CEO of LegalZoom. "It is encouraging to see that nearly 100 percent of younger entrepreneurs are confident in their future profitability, and this conviction has not been affected by the current economic climate."

"While overall confidence has fallen, it is encouraging that these businesses have decided to start up in the first place even amid continuing uncertainty over the macro-economy," said Dane Stangler, director of research and policy at the Kauffman Foundation.

Thirty-nine percent of entrepreneurs reported being very confident in future profitability, which stayed constant from the second quarter.

Entrepreneurs are also becoming increasingly pessimistic about consumer demand. In the most recent survey, one-third said they expect moderate to significant deterioration in consumer demand in the next 12 months – 6 percent more than in the second-quarter survey and 8 percent more than in the first-quarter survey.

Thirty percent of startup owners said they plan to hire additional staff in 2012, a slight decrease from 33 percent in the March survey.

The Kauffman Foundation sponsored the survey in conjunction with LegalZoom, the nation's leading provider of online legal document services and legal plans to young companies. The findings are based on 698 responses to a nationwide, June 2012 survey distributed via email to LegalZoom customers who formed their entities within the last 12 months. The Startup Confidence Index is conducted quarterly to gauge entrepreneurial confidence. The next survey will be conducted in October 2012.

The 16 percent of small business owners who applied for loans or lines of credit in the last year remained unchanged from the previous study.

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