Small Business Owners are Confident in their Operations, Less Confident in US EconomyApril 19th, 2023 by Travis Rains
MetLife and the U.S. Chamber of Commerce released their Small Business Index (SBI) recently, finding that while small business owners have declining confidence in the national economy, most believe their individual businesses are faring well. That’s certainly true of top door and window dealers, as, according to [DWM]’s recent survey data, those with 30 or fewer employees saw increases in annual revenues averaging 25%. However, for the fifth consecutive quarter, inflation ranks as the top concern, SBI data shows, affecting all manner of operations from raw material to transportation costs.
The index saw a slight drop this past quarter from 62.1 to 60, with only 20% of U.S. small business owners believing the U.S. economy is in good health. Last quarter, that figure came in at 27%. Additionally, only 38% of small businesses indicated plans to increase investments in the coming year, versus 47% last quarter.
On the other hand, small business owners were more confident in their individual operations. A majority, or 63%, said their businesses were in good health, while 64% were comfortable with their cash flow. Brett Sussman, vice president of American Express Business Blueprint, says he wasn’t too surprised by the report. Sussman believes that the COVID-19 pandemic incited an “entrepreneurial boom” in the U.S.
“During that time, people had the chance to sit back and ask ‘What am I passionate about?’” Sussman says. “Technology also made it easier for small business owners to open their businesses, so we’re really seeing more than five million small businesses started each year in the past two to three years.”
While Sussman says it’s “never been easier” to start a small business, he also notes that they’re “quite hard” to maintain.
“That’s where financial management and financial education are particularly important,” Sussman says. “It’s really important when you start a small business to be very lean in terms of cost and to make sure your business model works. Cash flow and cash flow visibility—not cash—is king.”
For this reason, he says finding the right cash flow management system is increasingly important, with two-thirds of surveyed small businesses looking for better options. Current systems, he says, may not provide small businesses with the necessary efficiency and consolidation capabilities.
“When we surveyed small business owners, they felt that inflation will persist through the rest of 2023,” Sussman says. “So, they really have to understand their cash flow visibility. That’s incredibly important.”
Inflation costs topped the list for challenges facing small business owners, as it has in the previous four quarters, with a record-high 54% now reporting that inflation marks the top challenge to overcome.
“Inflation is a real and consistent concern for small business owners,” Sussman says. “They’re seeing it in a number of places, most pronounced in their raw material costs. From lumber for construction companies to food ingredients or cooking oil, or the basic cost of doing business, such as shipping costs or buying computers, costs have all gone up.”
On a bright note, small businesses in the U.S. are seeing increased success in attracting and retaining employees. According to the most recent report, only 11% of small businesses indicate employee retention as a top concern.
“Small businesses are always focused on retaining and hiring the right employees,” Sussman says. “At the peak of the pandemic, that was a top concern as a lot of people were going through the great resignation and moving around. I think the job market has changed a bit and people are staying more consistently, so it’s less of a concern than it was historically.”
Looking forward, Sussman believes small businesses will continue to boom in the U.S. thanks to lower barriers for entry.
“But that breeds a little more competition,” he says.