Small Business Revenues Are Jumping, But …
Amid a 2022 wrought with inflation and economic uncertainty, you might be surprised to learn that at least by one measure, small businesses are booming.
But that measure is just one brushstroke in a complicated picture for America’s small companies.
A September survey from American Express’s Kabbage shows that U.S. small businesses are battling a turbulent economic environment with a combination of financial guile and flexibility. As of Kabbage’s last survey, reported in June, a whopping 80% of surveyed small business owners expressed confidence that they could withstand a U.S. recession, should one come to pass — and September’s survey helps to explain why.
Indeed, the findings of this survey may serve as something of a blueprint for small businesses looking for an edge. So today, we’ll explore some of the most important takeaways from the latest snapshot of Main Street, USA:
Small Business Revenues Up, Profits Down
For this latest report, Kabbage surveyed 550 small business leaders between July 14 and July 25, including 250 leaders at companies with fewer than 10 employees, 200 at small businesses with 11 to 100 employees, and 100 at businesses with 101 to 500 employees.
The headline number: According to self-reported data from this and previous Kabbage Small Business Recovery reports, U.S. small business revenues have jumped by an average of 87% between July 2021 and July 2022.
But things get muddier when you look at the bottom line: Profits over the same period declined by 4%.
You can blame inflation — small business leaders do. Seventy-five percent say rising prices have impacted their businesses, and more than half expect that to remain the case through at least next summer. However, four stats show how small businesses plan to counter these pressures:
- 37% say they plan to raise prices
- 33% say they’re going to prioritize customer relations and loyalty
- 22% are trying to negotiate better deals with suppliers
- 22% say they’re eliminating some lower-margin products and services
These businesses also see the importance of continuing to invest in growth, regardless of these headwinds.
Tops in this area was digital marketing; 47% of respondents say they’ve already increased spend in that area this year. 41% said they were prioritizing digital transformation, in areas such as data analytics, cash flow analysis tools and mobile apps. Social media advertising on platforms including Facebook, Instagram and YouTube is important, too, with 47% believing it will have the greatest influence on customer acquisition.
Small Businesses and the Labor Market
Inflation is also weighing on small business’s ability to hire, making pay, health benefits and other employee perks more expensive. These companies have responded by offering flexible work options that were popularized during the pandemic. And it’s working. Forty-nine percent of small businesses have begun offering their employees more flexible arrangements (hybrid work was the most popular at 27%).
And 77% of surveyed business leaders say doing so has helped them attract new employees.
Are You Built to Beat Back a Recession?
We can’t understate the stakes of being prepared for a financial downturn: If you don’t make it through, that means you no longer have your small business.
So don’t leave your economic preparedness to chance, and don’t make your plan alone.
McManamon & Co. accounting, tax, fraud, forensic and consulting firm that serves small and midsize businesses. Our accounting team can guide you in shoring up your finances ahead of a potential recession, while our business consultants can help you optimize your hiring, operations and cash flow.
Learn more about how McManamon can help your small business. Call us at 440.892.8900 or contact us online today.
Tags: McManamon, small business, small business finances | Posted in McManamon & Co., small business, Small business finances