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Check out any small-business economic survey and among the hiring index and salary data you'll find a measurement of something less tangible: optimism.
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Michael Alter, president of SurePayroll Inc. in Glenview, puts out a monthly Small Business Scorecard that asks entrepreneurs nationwide whether they are optimistic about the business climate. Crain's asked Mr. Alter, 40, why good vibes matter.

CRAIN'S: Why measure optimism?

MR. ALTER: We all make decisions based on limited information, so we look for metrics that can provide more certainty. If I own a store, I need something to tell me how much demand there will be going forward. That's why we have consumer confidence surveys. If I sell IT consulting services, what I learn about business owners' optimism can help me determine whether I'll have more or less work.

How can this information help a small-business owner?

If there was more hard data out there on actual small-business sales growth and spending on things like IT services and office supplies, then optimism would be less relevant in entrepreneurs' decision-making. But since there isn't, optimism is a gut check when businesses are deciding whether to do something like add another delivery truck or employee, buy more inventory or take on a particular capital expenditure. One of our clients, a software company owner, recently decided to hire a contractor rather than a full-time employee until she could see optimism going up.

You've been doing the scorecard since 2004, but you didn't add the optimism component until two years ago. Why?

If you looked at general consumer confidence and federal jobs data, our scorecard was going in the opposite direction, showing growth, not massive layoffs. So adding the optimism question was reassurance that our hard data represents what actually goes on in the small-business market. We're learning that the small-business owner perspective is different from that of the general population. The kind of person who runs a small business is inherently optimistic about the world.

Does your hard data on subjects like hiring trends or salary levels typically mirror the level of optimism?

Directionally, yes, all the data is the same. But the swings are much greater in optimism. To go from 64% in October to 78% in December, that's a dramatic increase. You don't see that kind of an increase in hiring or salaries. Just because I feel optimistic doesn't mean I'm going to jump right in and add employees in a 30-day period.

How does the survey measure optimism?

It's pretty straightforward: Respondents check whether they're "optimistic about the small-business economy" or "pessimistic about the small-business economy." Then we add up the responses.

How optimistic are small businesses right now?

Levels have been going down since the beginning of the year, from 70% in January to 68% in February to 66% as of mid-March. That's not surprising. But you still have seven out of 10 small-business owners saying they're optimistic about the economy. That's pretty good. It could be better, but it's not Armageddon.

Copyright © 2008. Crain's Chicago Business.