Small business owners are certainly optimistic about 2018. But I see clouds on the horizon.

(This post originally appeared on The Washington Post)

“If you were to generalize, you can safely say that small business people are the most optimistic people in the world.”

That’s the opinion of Tom Sullivan, an executive at the U.S. Chamber of Commerce — a client of my company, The Marks Group. His point of view is certainly justified. Each quarter, the chamber, representing the interests of more than 3 million businesses of all sizes, sectors, and regions in the country, publishes its Small Business Index in which about 1,000 small business owners every quarter are questioned about the state of their company and their outlook going forward.

This quarter’s index, based on interviews conducted between mid-September and mid-October, supports Sullivan’s position. Small business owners, as they head into 2018, are definitely optimistic.
How optimistic? 63 percent of them say they have a “positive outlook.” Fifty-seven percent predict an increase in revenue next year and a quarter of them plan to increase their investments. Most of them are more confident in their local economies over national prospects with 48 percent saying that their local economies were “strong.”

And, of course, there’s reasons for all of this optimism: a pro-business, less-regulatory environment in Washington, potential tax reform, an unprecedented bull market, sufficient access to capital and economic growth. All of this optimism is counter to the dark days of the Great Recession, which is almost 10 years in the past, and consistent with many other surveys, polls and indexes conducted by banks, associations and other big companies that continue to show strong confidence among small business owners.

But . . . is all this confidence justified? Are small business owners pulling the wool over their eyes? To me, there are plenty of clouds on the economic horizon that should give us all pause — and remind us to be careful. For example:

Tax reform may not be as great as we think. I’m a big supporter of both the House and Senate tax reform bills, because, hey … who doesn’t like a tax cut? But as the details continue to emerge it’s clear that small businesses won’t be getting as big a break as we hoped, certain key benefits like the R & D tax credit could disappear, and even some high-earning business owners could face a marginal rate of as much as 100 percent on their income. I’m hoping these issues get worked out during the reconciliation process but if a tax reform bill doesn’t convert into real dollars saved then there won’t be real investments and hiring made by the very people who are hoping to do so — that’s us.

Healthcare costs are exploding. The Republican-led Congress failed to repeal the Affordable Care Act and as a result the president is determined to strangle the law to such a degree that the issue is forced back to Capitol Hill. He’s doing this by cutting the subsidies his administration controls and watering down certain parts of the legislation which is driving more exemptions and lessening essential coverages. The Senate has done its part by repealing the individual mandate as part of its tax reform bill. The insurance industry, desperately trying to figure out how to make money in this environment, is raising rates and small business owners are finding themselves in the same situation that we’ve been in for the past 20 years, saddled with an out-of-control cost that’s killing our profits.

The stock market could precipitously fall. The rise in markets, fueled partly by the “Trump Bump” and speculative products like bitcoin has fattened our investment accounts and helped us all breathe a little easier about our looming retirements. But what if — as so many believe — there’s a major correction on the way? A large enough drop in prices would quickly bring back all the dark memories we’ve never forgotten about 2009 and immediately cause us — and our customers — to lock up our electronic checkbooks. All of those investment and hiring plans would be put on ice. The stock market is psychology and as we’ve seen as recently as January 2016, events like a fall in the Chinese markets, war, a terrorist attack or a major cybersecurity incident could immediately suck out all those paper profits from the markets that we’ve yet to realize.

Speaking of cyberattacks and international events . . . Yeah, the risks are certainly rising. A conflict with North Korea, fraying ties with Europe, continued Asian expansion by China, an aggressive move by Russia . . . all or any of these events would have an immediate impact on markets, capital and our “confident” economic outlook. Let’s also not forget the worrying rise in cyberattacks and data breaches. The Chamber’s index says that although 60 percent are “concerned” about cybersecurity, just 47 percent of small business owners feel they are “prepared” for a cyberattack and — based on my company’s client base — I believe that not one bit. There’s nothing more disconcerting than our entire economic system being paralyzed by an attack on our satellites, electrical grid or the databases of Amazon, Google and Microsoft which house so much of our data already.

Finally, there’s tight labor. Workers have dropped out of the workforce at an alarming rate over the past decade, immigrants who fill lower-wage jobs may be restricted entry into our country and those workers who are left are in short supply. A rising tide of increasing minimum wage, demands for more paid time off and better health insurance (see above) and more discrimination and harassment accusations have forced many companies to invest in technologies to automate processes and eliminate people. Can small companies keep up with this trend?

There are always challenges and despite the ones I list above, Sullivan remains confident in his small businesses, mainly because he believes that small businesses are feeling better able to navigate their companies on their own.

“It’s the wind at the back optimism,” he says. “There is this growing delta between the confidence that small business owners have in what they can control and know, and what is outside of that control.”

That’s good news because the more control we have over out destinies, the better we’ll able to determine those destinies. In the meantime, I can’t help but remember what my dad always told me when he was alive. “Son,” he would say. “Things are never as good as they seem.” It’s not a rosy point of view. But it’s certainly the right one nowadays.