By KENT BERNHARD JR.
Portfolio.com

Kelley Green has seen it happen.

She runs a bookkeeping and payroll service in St. Louis called Financial Housekeepers, and business was bad in March. It was so bad, in fact, that she branched out into working with individuals - especially senior citizens - on their finances, and not just doing the books for other businesses.

By August, things had started to pick up just enough for her to feel better about her prospects. Branching out into working with individuals had started to pay off with more business for her.

She'd worked hard for that pickup in business.

"I've been doing a lot of networking," she said. "I was definitely more optimistic last month than I was in March. In March I wasn't sure it was going to work out. Now "I'm actually considering taking on a salesperson and hopefully will be able to hire a couple more people and get things moving."

Her experience mirrors that of small-business owners across the country surveyed by City Business Journals Network, the advertising affiliate of Business First and Portfolio.com's parent company, American City Business Journals.

Fifty-two percent of small-business owners surveyed in August expected their business prospects to improve in the next 12 months, according to the survey of business leaders at firms with five to 499 employees. That's a 17-point jump from March, when only 35 percent saw improvement on the horizon.

"Their optimism is up, and everything follows that," said Godfrey Phillips, City Business Journals Network vice president, who oversees the tracking survey.

Even the Republican-Democrat divide that colors opinions these days on just about everything isn't as evident when it comes to small-business owners and their attitudes about their own prospects. Democrats - who comprised only 18 percent of those small-business owners surveyed - are especially optimistic, with 67 percent feeling their business prospects will improve in the next 12 months. Fifty percent of Republicans feel the same way.

On the most divisive issue of the day, health care, more than half of Republican and independent business owners fear changes to the health-care system will not deal with rising costs. Sixty-six percent of Democrats fear there will be no change and costs will continue to rise.

Fewer business owners, 36 percent, were worried in August about the long-term survival of their companies, compared with 46 percent in March. Still, only 28 percent thought the economy was turning around, compared with 42 percent who thought it wasn't and 30 percent who weren't sure.

And the economy still tops the list of concerns among small-business owners, ahead of such items as the rising cost of providing benefits, taxes and the rising cost of doing business. Among those who don't think the economy has turned around, the average time they expect a turnaround to take is now less than two years, down from 2.4 years in March.

The small-business owners' feelings aren't surprising, and they're shared by Federal Reserve Chairman Ben Bernanke. He said earlier this week that the longest U.S. recession since the Great Depression is "likely over." But, he added, "even though from a technical perspective the recession is very likely over at this point, it is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was."

Don Nielsen, owner of Light Doctor in Mountlake Terrace, Washington, puts himself squarely in the camp of business owners who are high on their own prospects but skeptical of the economy. His company installs energy-efficient lighting for business customers.

"I'm not too excited about the economy either, but I am optimistic about our own business," Nielsen said. "We are benefiting from the green movement and the rebates that utility companies are offering. We are on a roll now and hopefully we can keep it that way."

As for the economy as a whole? "I think it's stopped going down, and I think it is slowly going up, but I don't have great hope for a rapid recovery," he said. "There's a new normal, and it's lower."

Larry Hyatt, owner of the 50-year-old Hyatt Coin & Gun in Charlotte, N.C., also says he's optimistic about his company's prospects. But as for the national economy, color him skeptical, too. For him, the skepticism has everything to do with a loss of faith in government, large corporations and economic prognosticators.

"As to the future, there's been a loss of confidence. The economic reports and our 401(k)s and our homes ... took the big hit and, nobody seemed to have seen it coming," he said. "And that makes you wary. That loss of confidence in government and big corporations scared us a little bit."

William Dunkelberg, chief economist for the National Federation of Independent Businesses, said the tracking poll by his own organization shows business-owner attitudes improving. But small-business owners, he said, aren't yet confident enough to make big plans such as expanding or hiring a lot of people.

For Mac Nicholson, owner of Charlotte Pedicabs, a bike-taxi service, and a Sub Station II franchise, the issue isn't the economy at large. It's what he can do to bring success to his businesses. And for him, that means bringing on the optimism.

"I'm going to be positive," he said. "We all got to kind of pick ourselves up by the bootstraps and get on with it."

Kent Bernhard Jr. is news editor of Portfolio.com