It seems like such an innocuous question: “How’s business? Everything going well?” People just want to be encouraging. They really are rooting for you and they just want to hear that a company they like (and an entrepreneur they like) is doing well.
I’ve read that the standard reply in Silicon Valley is to say something like “We’re crushing it!” and all I can think is Thank God I don’t live in Silicon Valley. If someone in Chicago said that to me I would raise my eyebrows and think they had been watching too much Entourage.