SMALL BUSINESS CHECKUP: Small Business Owners Show Resiliency and Optimism, Mixed with Worry About the Future

By SBE Council at 14 August, 2024, 1:11 pm

NEWS

For Immediate Release

Washington, D.C. - In a newly released "Small Business Checkup Survey," the Small Business & Entrepreneurship Council (SBE Council) reported that most small businesses are effectively navigating challenging conditions and express a solid outlook on doing business in the current economy. At the same time, small business owners express concern about an economic slowdown or recession in the near future - 80% express such worry, and 75% are actively planning or taking steps in preparation. In response to challenging and competitive conditions, one key step small business owners are taking is the adoption and broader use of artificial intelligence (AI) and other tech tools across business operations - 84% of small business owners are currently using AI tools, and 85% say they will either increase or maintain their current levels of investment in AI solutions over the next twelve months. According to SBE Council calculations based on survey responses, current annual AI investments by small businesses amount to a conservative $46.2 billion.*

"As we've seen over the course of 2024 and four years prior, small business resiliency in the face of uncertainty and headwinds is a good news story. Thankfully, entrepreneurs have had the benefit of innovative tech tools to navigate through these challenges. Entrepreneurs have fully embraced innovative and disruptive technology to cut costs, fill operational gaps, run more competitively and efficiently, and to better serve customers. Such solutions have supported resiliency and a positive outlook. Still, ongoing challenges and concerns about access to affordable capital, workforce gaps, higher costs, the stability of the economy, and the direction of tax and regulatory policy are hindering their growth and outlook. That is why a positive policy environment that provides certainty and incentives - one that encourages investment, risk-taking, and innovation - is so important," said Karen Kerrigan, President & CEO of the SBE Council.

SBE Council chief economist Raymond Keating added:

"Small business owners have to constantly survey the economic, technological and management landscapes to discover opportunities for growth and for savings. Therefore, it's not surprising that 84% percent of entrepreneurs are making investments in AI tools and using a broad range of technologies to improve competitiveness and profitability. A hefty share of the challenges confronted by small business owners comes from costly, misguided policies imposed by elected officials. For example, 85% of small business owners say that they're concerned about inflation, and inflation ultimately is about Federal Reserve monetary policy gone awry. Also, 65% of entrepreneurs pointed to high taxes and tax complexity as a negative for their businesses, and 44% noted that new regulatory threats also were negatives. The sources of these negatives are largely White House initiatives or actions."

According to the survey, inflation continues as the number one concern of small business owners, with 85% noting distress or various negative effects of higher costs - 46% of small businesses report their revenues have not kept pace with inflation, while 49% say revenues have kept up.

Also in the survey, small business owners cite various conditions that are negatively impacting their business such as: inflation (75%), high taxes and tax complexity (65%), higher interest rates (65%), slower sales (62%), gasoline prices (60%), energy and transportation costs (57%), labor and benefit costs (56%), supply chain disruptions (53%), and labor shortages (52%).

According to the survey, the Biden Administration and its policy leadership is not looked upon favorably by small business owners. Over two-thirds (66%) give President Biden failing grades for his efforts in combating inflation, with only 16% rating his performance positively. Similarly, 58% of respondents are critical of his government spending, while just 21% believe he is handling it well. A majority (55%) are dissatisfied with Biden's handling of the economy, and only 23% give him favorable ratings. On a host of issues in the survey - immigration, taxes, competition with China, foreign affairs and crime - President Biden's policy leadership and policies are not resonating with small business owners.

Express Checkout Boosts Small Business: As demonstrated by our previous surveys, new technologies and their adoption are playing a big role in boosting sales and small business efficiency. According to the current survey, express checkout services used to process online payments are used by 58% of small businesses. These businesses are extremely pleased with express checkout, as 93% report that it helps their business succeed and operate more effectively.

Newer small businesses are more likely to use express checkout services, with 70% of firms aged 1 to 3 and 66% of those aged 4 to 5 utilizing these services. This drops to 57% for small businesses aged 6 to 9 and 49% for those 10 years or older.

"Express checkout - or online buy buttons - benefit both consumers and small business owners alike in terms of time and money saved. Potential federal efforts looking to regulate express checkout are not warranted. There have been no problems uncovered, and only benefits and gains for consumers and small businesses," observed Kerrigan.

SURVEY HIGHLIGHTS:

The Economy and Economic Outlook

● Small business owners view the current business environment positively - 31% rate it as excellent and 42% as good. However, 21% see it as average, and 6% consider it poor or unacceptable

● Looking ahead, 32% of small businesses expect economic conditions to improve over the next six months. Conversely, 28% anticipate a deterioration, while 37% believe conditions will remain stable. This reflects a cautious optimism mixed with uncertainty about the future.

● Regarding financial outlook, 47% of small businesses anticipate an improvement in their financial position within six months, 40% expect no change, and 10% are concerned that their economic situation may worsen.

● Over half of small businesses (56%) report the lack of available capital or credit is hampering operating capacity.

Top Policy Concerns

● The top concerns for small business owners are inflation (49%), economic uncertainty (24%), and potential recession (23%). Other issues include labor shortages (20%), competition (18%), declining sales (18%), and high taxes along with expiring tax provisions (18%).

Sales And Profitability

● For 2024, 43% of small businesses report increased sales, while 32% see steady sales and 23% anticipate declines.

● Profitability trends in 2024 show that 45% of small businesses report an increase in profits, 29% see no change, and 25% a decline.

● By the end of 2024, 52% of small businesses expect to be profitable, 24% anticipate losses, and 24% are unsure, reflecting a mix of financial outcomes.

Access the full survey here.

The "Small Business Checkout Survey" queried 542 small businesses with employees (2-99) from June 25-July2. TechnoMetrica conducted the online survey.

* Based on the latest data from the U.S. Census Bureau (2021), there are 6,186,983 employer firms with fewer than 100 employees in the U.S. If we apply this survey's findings to the Census data, we can arrive at some rough, but informative estimates regarding AI investment among small business employers across the economy.

This SBE Council survey found that 84% of small businesses use AI tools. Based on the Census data, that brings us to a universe of 5,197,066 small businesses using AI tools.

In turn, the survey found that the average annual investment in AI tools for small businesses was estimated at $8,893. That would indicate, based on SBE Council calculations, that annual AI investment by small businesses registered approximately $46.2 billion.

CONTACT:

Karen Kerrigan, [email protected]

Raymond Keating: [email protected]

SBE Council is a nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For nearly 30 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth.

Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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