Small businesses are feeling more confident and optimistic about the future than they have since the start of the pandemic, according to the Q2 2024 MetLife and U.S. Chamber of Commerce Small Business Index.
The current index score, which measures small business owners' and/or operators' perceptions of business operations, environment, and expectations, is 69.5 — an 11.6% increase from the Q1 2024 score of 62.3.
"Main Street employers are showing confidence and resiliency in the face of persistent inflation," said Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce, in a statement. "Last quarter's survey showed signs of confidence drifting upward with small businesses optimistic about revenues in the next 12 months."
Here are three reasons why small businesses are hopeful about the year ahead.
Expected revenue growth
Despite inflation being a top concern for most small businesses this quarter (55%), more business owners reported satisfaction with their cash flow in the second quarter than in the first quarter. In fact, small businesses are so comfortable with their current cash flow that a whopping 73% expect a revenue increase within the next year — the highest level of optimism ever recorded by the index.
Business owners' confidence in revenue growth likely stems from an increased positive perception of the economy compared to last year. Currently, 36% of small businesses think the U.S. economy is in good health, and 42% think the same about their local economies. However, it's important to note that these values did not change compared to the Q1 index.
[Read more: 5 Quantifiable Ways to Determine It's Time to Grow or Expand Your Business]
Main Street employers are showing confidence and resiliency in the face of persistent inflation.
Tom Sullivan, Vice President of Small Business Policy, U.S. Chamber of Commerce
Upcoming investments and new hires
The confidence in revenue growth has small businesses committing to expanding their teams in the next year (41%), a 7% increase from last quarter. Notably, 45% of male-owned small businesses are likely to increase their staff size over the next year compared to 35% of women-owned small businesses.
Nearly half of small businesses (46%) plan to increase investment in the next year too. This is a 10% increase from the first quarter and only 1% lower than the highest-ever recorded percentage in the fourth quarter of 2022.
"Small business owners' continued adaptability and growing optimism is inspiring and a positive sign for the economy," said Cynthia Smith, Senior Vice President, Regional Business at MetLife, in a statement. "As these employers continue [to] invest in and hire for their businesses, they should take a holistic approach and explore solutions like voluntary benefits that can help build their culture and attract and retain top talent."
[Read more: 3 Big Hiring Trends To Watch For]
The potential of AI to boost small business
In general, small businesses are optimistic about the future of artificial intelligence (AI) and how they can leverage AI tools to run their businesses more efficiently. Most small businesses are in the early stages of analyzing how AI can complement their organizations.
"We have begun to use [AI] in lead generation, vendor identification, the development of marketing materials, and a few other applications," said Michael Canty, President and CEO of Alloy Precision Technologies Inc., in a statement.
Almost half (49%) of small businesses plan to test-drive AI tools within the next year, while 40% say they have already tried different tools based on their business's needs.
Here are a few key ways small businesses expect AI to change their operations:
- Save time and money. Most small businesses believe employees with AI skills can save them time (71%) or money (67%) in the future.
- Create new roles for staff. With "AI proficiency" assumed to be a likely skill referenced in candidate resumes, 65% of small businesses anticipate changes to how current employees operate because of AI implementation.
- Improve their competitiveness. As AI becomes more common and popular, 74% of small business owners think employees leveraging AI tools will help them stand out among their competitors.
[Read more: AI Tools That Can Help You Start, Run, and Grow Your Small Business]
This summary provides a snapshot of the reasons small businesses are optimistic about the current economic climate and the future of small business. Read the full Q2 2024 Small Business Index report for more details.
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