The soaring of running costs are driving small business owners to become more pessimistic. However, they are seen to bounce back according to a national happiness survey.

Only 48 percent of businesses are expecting an improved performance in the coming 6 months, according to Westpac Local Business Sentiment Survey. Furthermore, it said that this figure is 11 points down from the May survey. Among those that cause the biggest worries are increased costs and declining revenue.

From just 33 percent, there are already 40 percent of respondents who now believe that it is becoming more difficult to run a business.

From the survey, it has been found out that 20 percent of businesses are being affected by managing costs such as electricity. This is higher than the figure six months ago according to Westpac Victoria General Manager, Julie Rynski.

"It is being seen as one of the greatest challenges for small businesses. It has meant they are not feeling as confident as they were. The level of optimism has certainly declined but not as much as it has in other states,” said Rynski.

According to Narelle Telford, Red Parrot Café co-owner in Gippsland town of Nojee, customers are opting to share their meals or buy snacks that are a lot cheaper. As a result, his business is also going through a tough time.

"They are very nervous about spending and we don't know how long that is going to go on for, of course,'' Ms Telford said.

"We've still got customers coming in, which is lovely, but they are spending less. The bottom line is at the end of the day the till doesn't hasn't got as much money in it to pay our bills. When you are in small business you just have to make the most of it and just think of ways you can deal with any situation,'' said Ms Telford.

From ranking among the happiest businesses in the nation six months ago, Victorian businesses are now at rank 56.