- Data shows U.S. small business’s revenues have increased on average by 87 percent.
- 37 percent stated they plan to raise prices.
- U.S. small businesses feel a heightened need to invest in areas for growth.
by Brett Sussman
While the pandemic hurt many businesses, others quickly switched gears and tried new tactics to boost sales. The latest Small Business Recovery Report issued by Kabbage from American Express tracked the trends and growth outlook of U.S. small businesses and how they were able to increase revenue.
Polling 550 small business leaders, the report shows that those 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 just survive, but also flourish during challenging economic times. Inflationary pressure and challenges with hiring and retaining talent, among other factors, are driving these small companies to fine-tune their business practices.
Offsetting Economic Costs & Supporting Growth
In the June 2022 Small Business Recovery Report, the data showed 80 percent of small businesses are confident they could withstand a potential U.S. recession. The data from the 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 business’s revenues have increased on average by 87 percent.
While revenue is up, the data also revealed overall profits among U.S. small businesses have slightly declined four percent over the same time period. These businesses continue to anticipate future economic obstacles, as 75 percent of respondents report feeling impacted by inflationary pressures and 56 percent expect pressures to last at least a year until summer 2023.
Yet, small businesses are dealing with increased costs. From the report:
- 37 percent stated they plan to raise prices.
- 22 percent aim to negotiate better deals with suppliers.
- 22 percent are cutting lower margin products and services from their offerings.
- 33 percent of small businesses plan to prioritize customer relations and strengthen customer loyalty to help increase future revenue.
Getting Creative with Employment Opportunities
They are also rethinking how best to navigate employee recruitment and retention. Forty-seven percent of all respondents reported that inflation is impacting their labor market by pushing them to accommodate higher healthcare costs, enriched employee benefits and more frequent pay raises.
Small businesses are leaning into the new way of work by offering hybrid and remote work options. Forty-nine percent of respondents have started offering flexible work options to stay competitive with hybrid work (27%) being the most popular option. This has proven effective, as 77 percent 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 businesses compared to the smallest.
Expanding Investments for Growth
U.S. small businesses feel a heightened need to invest in areas for growth. The top two areas were prioritizing digital transformation (41%) and digital marketing. 47 percent stated they have increased digital marketing spend already this year.
When asked to better define this digital transformation, 29 percent of all stated they aim to strengthen their data analytics capabilities. 31 percent want tools to reexamine their cash flow to help predict future financial gaps. 29 percent of small businesses are prioritizing mobile and investing to build a mobile app for their brand.
Small businesses are also capitalizing on social media advertising, as 47 percent 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.
Brett Sussman is Vice President Head of Sales & Marketing, Kabbage from American Express.