The Fourth Quarter 2010 Wells Fargo/Gallup Survey: Small business owners look
to changes in operations, employment in 2011 Cutting costs remains top concern,
but growth is back on the agenda

According to the latest Wells Fargo/Gallup Small Business Index survey, conducted
in November 2010, 57 percent of business owners surveyed say they plan to make
changes in 2011, with 43 percent saying they plan to expand their business operations.
Of those respondents who are looking to expand, 56 percent say they intend to add
employees.

Hiring continues to be a focus for business owners. Looking back at 2010, 51 percent
of business owners with paid employees say that they hired new employees. Forty-one
percent of those business owners who hired did so to replace an employee who left;
another 21 percent were hired to support growth or expansion plans. Of the business
owners who hired in 2010, 42 percent say they hired fewer new employees than they
needed. Business owners foresee a somewhat better employment outlook in 2011: 18
percent say they expect hiring to increase at their companies over the next 12 months,
up from 13 percent in Q3 2010.

Mary Canales, owner of Ici Ice Cream in Berkeley, CA, is one such entrepreneur.
“When expansion or marketing opportunities arise, we always look to the original
mission defined in our business plan. Other aspects of our plan may change, but
growing slowly and thoughtfully with the mission in mind is fundamental,” says
Canales. Ici Ice Cream currently employs a staff of 36 in Berkeley and hopes to
hire another manager. “Building a bigger kitchen and adding management help will
give me more time to pursue opportunities that fit my original business idea.”

Compared to the same survey questions asked in 2008, this quarter’s Index shows
some additional signs of optimism. Business owners surveyed in 2008 were bracing
for the worst: cutting operating costs was a key focus, indicated by 79 percent
as a very high or high priority. This year, while cost cutting remains a top
concern (64 percent), other more forward-looking priorities have gained ground,
including being more involved in communities (43 percent), planning a succession
strategy (42 percent), and increasing advertising and public relations (40 percent).
Using social media and increasing investments in technology are also cited as high
priorities by approximately a third of those surveyed.

Business owners also responded with their key concerns for 2011. The most pressing
concern was retirement and succession planning, with 64 percent saying they worry
about putting enough money away. However, 57 percent indicated that saving for
retirement is actually a low priority for the coming year – evidence that many
business owners may still be facing considerable financial stress.

“Business owners continue to focus on their financial health and appear to be
heading into 2011 with cautious optimism about business growth prospects,” said
Doug Case, Wells Fargo Small Business Segment Manager. “Wells Fargo is committed
to providing knowledgeable bankers and educational resources to help owners
navigate the changing business environment and take advantage of new opportunities.”

About the Small Business Index
Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small
business owners on current and future perceptions of their business financial
situation. The Index consists of two dimensions: 1) Owners’ ratings of the current
situation of their businesses and, 2) Owners’ ratings of how they expect their
businesses to perform over the next 12 months. Results are based on telephone
interviews with 604 small business owners in all 50 United States conducted November
4-10. The overall Small Business Index is computed using a formula that scores and
sums the answers to 12 questions — six about the present situation and six about
the future. An Index score of zero indicates that small business owners, as a group,
are neutral -- neither optimistic nor pessimistic -- about their companies’ situations.
The overall Index can range from -400 (the most negative score possible) to +400 (the
most positive score possible), but in practice spans a much more limited range. The
margin of sampling error is +/- four percentage points.