Though a growing number of economic indicators point to an improving economy, the latest Citibank small business survey indicates otherwise. An overwhelming majority (77 percent) of small business owners say they believe current business conditions are only fair or poor, while 43 percent say their own business condition is worse off than it was a year ago. At the same time, however, a majority (58 percent) of small business owners say their business has performed better than expected. Looking ahead, slightly more than four in 10 said they expect business conditions will improve in the next 12 months, expressing a tempered level of optimism.

While small businesses have typically led the economy out of recessions, only 17 percent of small businesses expect to increase their number of full-time employees in the next 12 months. This lack of hiring is being driven by uncertainty about the economy in general (80 percent), a belief that they have the right number of employees for their current business volume (79 percent), uncertainty about how their business will do over the next 12 months (75 percent) and diminished sales (70 percent).

When asked what would encourage them to hire additional employees, the majority of small business owners surveyed said an increase in their business volume (92 percent) or an improved general business climate (81 percent). Another 64 percent would be encouraged to hire if they received a permanent reduction of their payroll tax rates or if their state, local, sales or property taxes were reduced (54 percent).

Entrepreneurial Spirit Thrives Despite Recession

And despite the challenging environment, the survey showed that small business owners remain firm believers in owning and running a business. Seventy-one percent of respondents say they would start their business again, even if they knew then what they know now about the challenges they would face, and 58 percent would recommend small business as a career to their children.

“While the overall economy appears to be recovering, most small businesses continue to struggle. Yet we are encouraged to see that small business owners remain committed to entrepreneurship and that many believe their businesses will be better off in 12 months,” said Raj Seshadri, the head of Small Business Banking at Citibank.

Among the survey’s other key findings:

- 66 percent say the recession has “forever changed” how they run their business

- 49 percent say “my business is surviving and things are somewhat better than I expected” vs. 36 percent who say “my business is struggling and worse than I expected.”

- Respondents cite increase in sales (38 percent) and improving economy (18 percent) as the top factors needed to improve their business performance over the next 12 months.

Younger Small Business Owners are More Optimistic

The survey uncovered surprising differences between age groups, as respondents aged 18-44 were more optimistic on a range of questions than those aged 45 or older. For example, 53 percent of younger respondents say their business will be better off in 12 months, compared to 41 percent of those 45 or older. In addition:

- 55 percent of younger respondents say the recession has “forever changed” the way they run their business, compared to 69 percent aged 45 or older.

- 33 percent of those aged 18-44 say business conditions are currently somewhat or much worse, compared to 46 percent aged 45 or older.

- 23 percent of respondents 45 or older say they would not start their business again knowing what they now know about the challenges they would face, while only 9 percent of those aged 18-44 say they wouldn’t start their business again.

"In an environment where executives say that their small businesses have been 'forever changed' by the recession, younger executives express more optimism” Seshadri says. "Our survey indicates that younger entrepreneurs are more inclined to have a different attitude towards stimulating business growth and change."