Despite significant challenges, small business owners in the United States remain resilient and optimistic, managing to grow in the complex economic landscape characterized by inflation, a competitive labor market, and rising material costs. The 2024 U.S. Bank Small Business Perspective report sheds light on these dynamics by gathering feedback from small business owners and employees on the challenges and opportunities they face.
“Small business owners continue to show resilience and optimism despite feeling impact from ongoing stressors such as the economy, changing labor market dynamics, higher prices and wages, and other macroeconomic factors. The survey also reinforces the importance they place on digital tools in increasing efficiency and productivity. As small businesses owners rely more and more on software to manage their operations, U.S. Bank is focused on bringing our clients a seamless integrated experience across banking and payments to help streamline their cashflow and workflow,” said Shruti Patel, Chief Product Officer for Business Banking at U.S. Bank.
According to the report, 73% of small business owners had seen growth in the previous year, with even higher percentages recorded among Black (84%) and Hispanic (80%) entrepreneurs. However, many business owners are still dealing with personnel shortages (52%), a competitive labor market (77%), and the need to increase employee compensation to keep up with inflation (65%). To address these concerns, 83% of business owners intend to provide flexible working hours to help their employees achieve a better work-life balance.
Relying on digital tools
In addition to tackling labor difficulties, small business owners are increasingly relying on digital tools and technologies to achieve their objectives. A considerable 75% intend to focus on digital solutions in the coming year, while 68% recognize the benefits of AI and automation, with 60% currently implementing such technology. However, over half (47%) of entrepreneurs are concerned that automation would replace their company.
The survey also identifies the top five macroeconomic stresses affecting small businesses: competition (73%), the economic environment (71%), inflation and rising expenses (65%), supply chain disruptions (47%), and access to adequate capital (42%). These pressures are not simply theoretical issues; they have practical consequences, with 49% of entrepreneurs indicating that they are delaying development plans and decreasing income.
Creating strategies
As small business owners plan for the future, digital technologies and artificial intelligence are becoming increasingly important components of their strategies. While 71% of owners and 55% of employees agree digital technologies are necessary to streamline their work, concerns about automation's impact on jobs remain. For example, 48% of employees are unsure how automation will affect their job functions, while 25% are concerned that their positions may be replaced. This issue is especially strong among younger employees, with 30% of Gen Z and Millennial workers worried about automation, compared to only 19% of older generations.
Despite these worries, 79% of small business owners who have yet to incorporate AI are willing to do so within the next year, indicating a cautious but optimistic approach to technological integration.
