By Brett Sussman is Vice President Head of Sales & Marketing, Kabbage from American Express.
Kabbage from American Express issued the seventh installment of its Small Business Recovery Report, which tracks the recovery trends and growth outlook of U.S. small businesses. Polling 550 small business leaders, the latest report shows that the businesses surveyed have nearly doubled monthly revenue between July 2021 and July 2022 while profits slightly declined amidst economic hurdles. They are facilitating growth by modifying their business tactics – offering increased benefits and flexibility for workers along with investing in digital transformation.
U.S. small businesses are adjusting to not only survive but flourish during challenging economic times. Inflationary pressure and challenges with hiring and retaining talent, among other factors, are driving small businesses to fine-tune their business practices.
Offsetting Economic Costs & Supporting Growth
In the June 2022 Small Business Recovery Report, the data showed 80% of small businesses are confident they could withstand a potential U.S. recession. The data from the latest report helps illustrate why. Since March 2021, the Small Business Recovery Report has captured self-reported revenue and profits from small businesses across the U.S. Cross-analyzing the survey results between July 2021 and July 2022, the data shows U.S. small businesses revenues have increased on average by 87%.
While revenue is up, the data also revealed overall profits among U.S. small businesses have slightly declined 4% over the same time period. The data shows small businesses continue to anticipate future economic obstacles as 75% of respondents report feeling impacted by inflationary pressures and 56% expect pressures to last at least a year until summer 2023.
Yet, small businesses are actively balancing increased costs. From the latest Small Business Recovery Report, 37% stated they plan to raise prices, 22% aim to negotiate better deals with suppliers, and 22% are cutting lower margin products and services from their offerings. An additional 33% of small businesses plan to prioritize customer relations and strengthen customer loyalty to help increase future revenue.
The New Way to Work Is Working
As small businesses contemplate costs, they’re also rethinking how best to navigate employee recruitment and retention. 47% of all small business respondents reported that inflation is impacting their labor market by pushing them to accommodate and compensate for higher healthcare, enriched employee benefits and more frequent pay raises.
Small businesses are also leaning into the new way of work by offering hybrid and remote work options. 49% of small businesses have started offering flexible work options to stay competitive in the labor market with hybrid work (27%) being the most popular option. This has proven effective as 77% of respondents reported it has made a positive impact on their ability to attract new employees.
When analyzing hybrid and remote working options by business size and age, the highest adoption rate is among businesses less than two years-old (57%); and these options are nearly twice as likely to be implemented among the largest small businesses compared to the smallest small businesses.
Expanding Investments for Growth
U.S. small businesses feel a heightened need to invest in areas for growth. The top two areas of focus were prioritizing digital transformation (41%) and digital marketing, as 47% stated they have increased digital marketing spend already this year.
When asked to better define this digital transformation, 29% of all small businesses stated they aim to strengthen their data analytics capabilities while nearly one third (31%) of respondents want tools to reexamine their cash flow to help predict future financial gaps. Further, 29% of small businesses are prioritizing mobile and are investing to build a mobile app for their small business.
Small businesses are capitalizing on social media advertising as 47% expect it to have the greatest impact on customer acquisition. Facebook is reported as the top platform of choice among small businesses, nearly double that of the second choice, Instagram. These are followed by YouTube, LinkedIn and Twitter; then followed by TikTok, Pinterest, and Snap.