The new Discover Small Business Watch survey results were released today, and they are the most powerful piece of evidence yet that U.S. small businesses are adapting to the credit crunch and slower economy. This month's survey is encouraging compared with April's: a decrease in the number of small businesses reporting cash-flow problems, a decrease in the number of business owners who think the overall economy is getting worse, and an increase in the number who think their personal business conditions will get better. All of those indicators had gone in the wrong direction last month, so it's good to see that slide coming to a halt.
But let's be clear: Adaptation does not mean elimination. These numbers by no means suggest that small-business people think they're out of the woods. Look at that last indicator—the percentage who think their own business conditions will improve in the next six months. That stands at 28 percent in May, which is up from 24 percent in April—but down from 31 percent in January and way down from 43 percent in May 2007.
Perhaps business folks are just being cautious in their assessments. The share reporting cash-flow problems is the best sign of hope. It's at 39 percent now, about the same as the 41 percent from a year ago. If cash-flow problems stay in check, then small-business optimism should continue to rise.