Small business owners are feeling less optimistic about the economy and growth compared to earlier this year, according to Capital One's Spark Business Barometer, an ongoing survey measuring the economic perceptions and financial conditions of small business owners, as well as the most common trends and challenges facing entrepreneurs and local businesses today.

According to the survey, less than a third (31 percent) of business owners reported improved financial positions over the past year, down four points since March. Growth expectations also fell, with only 38 percent expecting improved financial position in the next six months, down from 47 percent in March. Despite the stalled optimism, business owners plan to increase investments in key areas including: solutions that drive efficiency (34 percent), expanded workforces (20 percent), and new technology to improve client interactions (18 percent).

"Business owners appear to be slightly more cautious given recent market turbulence, pending regulations, and the upcoming election cycle – all posing a variety of uncertainties about the future," said Buck Stinson, Head of Small Business Card at Capital One. "At the same time, it's encouraging to see business owners taking the steps needed to remain competitive – prioritizing and investing in solutions that drive efficiency and enable growth."  

Capital One's Small Business Confidence Score
Capital One's Small Business Confidence Score is an analysis of small business sentiment data collected by the Spark Business Barometer – looking at economic sentiment, hiring plans, recent sales, and future outlook. According to the Small Business Confidence Score, business owners are more cautious, feeling less certainty about their business' conditions and future outlook, and more reluctant to hire additional staff in the next six months. 

*The Capital One Small Business Confidence Score evaluates responses to a series of questions from the Spark Business Barometer and ranges from -100 (very low confidence) to +100 (Very High Confidence).

The latest Spark Business Barometer uncovered the following insights related to small business sentiment and plans for the future:

Business owners are cautious amid economic and financial uncertainty. As financial markets continue to fluctuate, The Spark Business Barometer uncovered that business owners are more cautious in their spending, forecasting and overall outlook on current financial conditions.

• Fifty percent of small business owners feel business conditions in their area are fair or poor.

• Only 31 percent of business owners feel their firm's financial position is improved compared to 12 months ago; in our last Barometer (March 2015), 35 percent of respondents affirmatively answered this question.

• When considering business outlook, 38 percent believe they will be in a better position in the next six months – a decrease of nine points (47 percent) from March 2015.

Amid uncertainty, women and millennial-owned businesses continue driving optimism. In addition to their optimism, both millennials and female business owners admit to having increased sales in the last six months. Fifty-seven percent of millennials reported increased sales in the last six months, leading all other generations by more than 15 percentage points.

• Fifty-six percent of female small business owners believe current business conditions are excellent or good vs. 44 percent of males.

• Seventy-one percent of millennials (18-34 year old) believe current business conditions in their area are excellent or good (compared to 47 percent of Gen X (35-49 years old), 46 percent of Baby Boomers (50-69 years old), and 45 percent of Mature (70+ years old).

• Forty-nine percent of millennials believe their financial position is better than a year ago compared to 36 percent GenX, 28 percent Baby Boomers, 23 percent Mature.

Small businesses are struggling to keep up with the pace of technology, and lack tools that drive efficiency. As small businesses work to establish themselves and grow, they struggle in key areas that limit growth opportunities. According to the survey, following are some of the top challenges business owners face:

• Finding efficient ways to operate business (34 percent)

• Managing business expenses (32 percent)

• Managing cash flow (25 percent)

• Finding the right software, technology, and/or management tools (16 percent)

Mobile and digital adoption stalls when it's needed most. Small businesses regularly admit to experiencing challenges with running their business. Adopting new technologies is one approach they can take to increase productivity, organizational efficiency, and even sales – yet many have not embraced technology solutions designed to address their unique needs.

• Eighteen percent of small business owners plan on investing in technology solutions that improve client interactions (e.g., proprietary mobile app), even though 34 percent would like to find ways to increase efficiency within their business.

• Fourteen percent of small businesses currently manage their business finances on a mobile phone.

• Twelve percent plan on increasing investments in e-commerce and digital tools.

• Six percent will increase investment in digital payment solutions such as Apple Pay.

Many business owners are still unaware of EMV requirements and chip-enabled credit cards. As of October 1, 2015, all merchants accepting payments will need to be certified as EMV-compliant, and will be held responsible for card-present counterfeit fraud losses if they aren't compliant. Multiple studies, including the Spark Business Barometer, show many small business owners lack awareness of these soon-to-come changes.

• Only two in every five business owners (43 percent) are currently familiar with EMV, chip, or PIN-enabled credit cards.

• Of the 43 percent of respondents familiar with EMV, chip, or PIN-enabled credit cards, only 34 percent currently accept them as a form of payment (as of August 2015).

• More than half (54 percent) of business owners who are familiar with EMV, chip, or PIN-enabled credit cards are unaware of pending regulations that will make businesses liable for fraudulent charges incurred on other payment systems.

"The new EMV requirements are intended to help protect businesses from payment fraud, but research shows many business owners are slow to adopt the new technology for a variety of reasons," Stinson said. "There are a lot of resources available to help business owners understand the requirements and make the transition – and it is important for businesses to comply, particularly if fraud is a concern."