By Gina Taylor Cotter, Executive Vice President & General Manager of U.S. Small Business Banking and Kabbage
A new confidence has emerged among small business owners despite the idea of a looming recession. This outlook is revealed in the latest Small Business Recovery Report by Kabbage from American Express. In its sixth installment, the report tracks the recovery trends and growth outlook from the polling of 550 small business leaders. For many, the pandemic resulted in a positive and persevering outlook of an uncertain economic future. Small business owners are staying confident focusing on branding, marketing, adjusting for inflation and prioritizing online sales to beat out competitors.
Potential U.S. Recession Concerns
The survey’s new data illustrates that the majority of U.S. small businesses are expecting a U.S. economic recession and considering its impact on them. While more than four in five respondents (83%) are concerned there will be a U.S. economic recession soon, 80% of businesses are confident that they can withstand it.
For the respondents that are confident they can survive a recession, the pandemic was cited as the top reason (31%) as why they feel this way, saying it helped them find a greater sense of resilience and preparedness to be successful in the future despite economic turbulence.
Continuing to Adjust for Inflation
As small businesses weigh a potential U.S. recession, they continue to face economic hurdles such as inflation and supply chain disruptions. In the March 2022 Small Business Recovery Report on Kabbage, respondents reported increasing prices by an average of 21% across industries, largely due to increased costs from vendors (54%) and of raw materials (45%).
The new data shows how inflation is changing how small businesses manage their cash flow. Among those that applied for a line of credit this year or are planning to apply in the next 6 months, 46% said they will most likely use the additional capital to cover inflation costs.
Similarly, the March 2022 Small Business Recovery Report showed that over half (53%) of small businesses expected their business to be impacted by supply chain obstacles for the next three months to a year. The new report finds that supply chain disruptions continue to be an issue with 24% of small businesses planning to use funding to cover costs due to supply chain shortages.
Competing Through Branding and Marketing
Given the current market and its various complexities, 45% of businesses are trying out new competitive strategies compared to before the pandemic. This is particularly true among medium and large small business respondents.
A combined 57% of medium and large and 29% of the smallest small businesses surveyed cited branding as their primary differentiator from competitors.
The latest Small Business Recovery Report showed a significant push around marketing among small businesses. A combined 44% of medium and large small businesses reported that their business is now marketing through social media and digital channels that are different from their competitors.
Selling Online Continues for Some
In the March 2021 Small Business Recovery Report on Kabbage, respondents said their monthly online sales made up on average 57% of their total revenue. Now, with more time passed from the height of the pandemic, that number has slipped to 40%; however, new data shows that some unexpected industries like healthcare have seen a boost in online sales, while others such as hospitality have seen a drop.
36% of healthcare-related companies stated they were not likely to receive most of their revenue online but have seen an increase in online sales since the pandemic. This aligns with a recent McKinsey study that shows a rise in telehealth going forward.
Conversely, 32% of the hospitality companies, stated they typically do receive most of their revenue online but have seen online sales dip recently since the peak of the pandemic.
The recovery report shows small businesses continue to adapt and prioritize a variety of strategies as market challenges remain constant. Whether it continues to be the pandemic, a potential recession or other issues that lie ahead, entrepreneurs will continue the will and a way to survive and thrive.