Small Business Owners Are (Mostly) Positive About the Economic Outlook for 2024
Happy days are here again for small business owners—well, kind of. There’s a lot of good news (mixed with some challenges) in several reports and surveys of the nation’s small business owners.
Small business economic outlook
The just-released 2024 Bank of America Business Owner Report reveals that 65% of small business owners expect their revenues to grow this year, and 55% report they made more money in 2023 than in 2022—a positive trajectory.
Over the next 12 months, small business owners also plan to expand their businesses (39%) and hire more employees (30%). Though these are positive numbers, they’re slightly down from last spring’s Small Business Owner Report (SBOR).
While the small business owners surveyed were bullish on their own companies, they were a bit more cautious about the national economy, with only 33% expecting it to improve over the next 12 months. (Curiously, this is far less than the 75% of mid-sized business owners who think the national economy will improve in the next year.) And only 42% of small business owners believe their local economies will improve in the next year.
Economic concerns
Small business owners are still concerned about inflation and higher interest rates, but they are less worried than they were a year ago. Their biggest concerns this year are the presidential election (78% are worried) and the political environment (75%). And 61% of small business owners are expecting the presidential election to impact their businesses, resulting in increased sales (31% ), higher business costs (29%), and having to raise prices (28%).
Other top concerns:
- Inflation—73%
- Healthcare costs—69%
- Interest rates—63%
- Commodities prices—61%
- Recession—56%
- Strength of the U.S. dollar—53%
- Corporate tax rates—52%
- U.S./global stock market—50%
Issues like labor shortage/hiring challenges, supply chain woes, and credit availability are less worrisome than they were previously.
Inflation
As noted, inflation is still a concern for small businesses, and 84% say it currently impacts their businesses. Due to inflation, small businesses have:
- Raised prices—68%
- Reevaluated cash flow & spending—40%
- Increased employee wages—30%
- Lost sales—29%
- Reduced business costs—27%
Obtaining funding
Fewer small businesses plan to obtain funding this year, 71%, down from 82% in last spring’s report. Only 16% plan to apply for a bank loan or line of credit this year, down from 24% last spring.
Credit cards
A separate report, the Small Business Checkpoint from the Bank of America Institute, shows small businesses have become more reliant on credit cards, with balances up 18% since 2019. While rising balances typically are concerning, the Institute notes that adjusted for inflation, “credit card balances are comparable to, or even lower than, 2019 levels.”
Running and growing a small business
Driving customer engagement
How are small business owners attracting customers? By prioritizing offering a unique customer experience and humanizing their business through personalized interactions, requesting feedback, and building brand awareness. And 65% use social media to interact with customers and promote their businesses.
Most small businesses (82%) have implemented customer engagement tactics (77% say they’ve been successful), including:
- Personalized customer interactions—80%
- Implementing customer feedback—48%
- Direct marketing (direct mail and email newsletters)—38%
- Frequent sales and discounts—27%
- Hosting community events—24%
- Loyalty awards/programs—23%
Gathering customer feedback is key for 79% of small business owners. How do they get feedback?
- Monitor online review platforms—48%
- Compiling feedback in an email inbox—41%
- Requesting feedback in-person at the store—40%
- Sending email customer service surveys post-purchase—30%
Digitization
Over the past 12 months, 71% of small business owners have digitally optimized their business. Actions taken include:
- Doing business banking online/in mobile apps—51%
- Accepted more forms of cashless payments—45%
- Created/grew their social media presence—37%
- Implementing more digital-first marketing strategies—27%
- Added cybersecurity measures—21%
- Used a cloud-based platform—19%
AI implementation
Of the 37% of small business owners who plan to implement AI, they’re going to use it to differentiate themselves from their competitors (47%), streamline payroll and bookkeeping (36%), and help with hiring efforts (25%).
Sustainability
According to the report, “More small business owners are implementing sustainable business practices compared to last spring, but they are running into various roadblocks as they integrate sustainability into their operations.” This year, 81% have implemented sustainable business practices, and 71% say they’re committed to sustainability.
The most common sustainable practices:
- Minimizing the use of paper—68%
- Establishing more environmentally friendly habits (recycling)—57%
- Offering a hybrid work environment (reduces transportation costs)—30%
- Working with sustainable vendors/suppliers—25%
However, implementing sustainable business practices comes with challenges for 69% of the businesses, including:
- Increased costs—44%
- Customer frustration with higher prices—20%
- Customer indifference to sustainability efforts—18%
Making personal sacrifices to maintain profitability
Most business owners surveyed say their companies are profitable, but they’ve made personal and professional sacrifices to get there. In fact, 70% say they’ve “made tradeoffs” to maintain profitability.
The tradeoffs include increasing prices (47%), working more hours (45%), reducing their own salary (32%), and reducing marketing costs (24%).
Bigger businesses are more optimistic
This year, Bank of America has combined its annual Small Business Owners Report with insights from mid-sized businesses “to create a comprehensive report that explores the perspectives, aspirations, and future outlooks of business owners across the country." Interestingly, mid-sized business owners are even more optimistic than small business owners: 87% believe their revenues will increase, 80% plan to expand this year, and 69% plan to hire. And 93% of the mid-sized companies surveyed plan to obtain funding this year.
But, in general, both small and mid-sized business owners anticipate a good year. I asked Sharon Miller, the president and co-head of business banking at Bank of America, if she found anything in the report problematic for small business owners. Miller says, “While the rate of inflation has slowed in recent months, small business owners still note that inflation is a top concern for their businesses.”
That concern seems to be tempered with what Miller found surprising about the report. She says, “What surprised me the most was how many key concerns are down across the board for small business owners this year. More specifically, concerns around a potential recession (down to 56% from 72% in spring 2023) and the impact of supply chain issues (down to 41% from 57% in spring 2023) both saw notable year-over-year percentage point declines. Our data shows that business owners are confident in their businesses and revenue expectations and are continuing to plan for and invest in their futures.”
For an in-depth look at the insights of the nation’s small and mid-sized business owners, please read the full 2024 Bank of America Business Owner Report.
