Operations, Environment & Expectations
Small Business Operations: Small businesses’ optimism steady, cash flow comfort inches up
The majority of small business owners remain optimistic about their business, like they were last quarter. Over half (61%) of small business owners say their business is in good health this quarter. This is unchanged from last quarter, which previously marked the highest rating on this measure since the onset of the pandemic.
Consistent with previous quarters, small businesses that employ more people are more comfortable with their business health. Just over half (55%) of small businesses with fewer than five employees say they are in good health, compared to 66% of small businesses with 5-19 employees and 84% of small businesses with 20-499 employees. Compared to last quarter, this marks an increase among those with 20-499 employees (previously 74%).
Seven in ten (70%) small businesses are comfortable with their cash flow. Though this is essentially unchanged since last quarter (67%), it marks the continuation of a consistent, gradual trend upward since the pandemic low of 48% in April 2020. Again, companies with more employees are more comfortable with their cash flow.
Roughly one in five (19%) small businesses say they have increased staff in the past year, while a majority (65%) have retained the same staff size. This is in line with last quarter. As with the previous operational measures, the largest small businesses (those with 20-499 employees) indicate they have increased staff more than those with fewer than 20 employees. More small businesses in the professional services (30%) and retail (23%) sector say they have increased staff compared to those in the manufacturing (12%) or services sector (10%).
Small Business Environment: Small businesses’ views of national, local economies stabilize
Small business views of the national and their local economies remained consistent this quarter, although they are not overly optimistic. About one in three (29%) small businesses rate the overall U.S. economy as good, while nearly four in ten (39%) rate their local economy as good.
Although small businesses are not particularly bullish about the economy, they have expressed more stability in their economic sentiment since Q3 2021 compared to earlier in the pandemic, particularly at the local level. Small businesses in the services industry have a less positive outlook on the national and local economy compared to those in retail and professional services.
Half of small businesses indicate the level of competition from smaller or local companies over the last six months has remained the same (50%), while three in ten (30%) say it has increased. Professional service firms (40%) are more likely than those in manufacturing (24%) and services (24%) to say they face increased competition.
Rossi Enterprises, Inc., Chicago, IL
Small Business Expectations: A majority of small business owners expect increasing revenues
Small businesses are generally optimistic for the next year as evidenced by their plans to hire, invest more, and anticipate increasing revenue.
A majority (52%) plan to retain their staff size, while 37% plan to increase staff (this is near the record high for this finding of 38%, recorded last quarter). This desire to hire more workers indicates that the competition for talent will continue unabated this year. Meanwhile, eight in ten say they plan to either increase investment (40%) or invest in similar rates as last year (40%).
Finally, 63% anticipate their revenue will increase. Although this is similar to the share who said so in Q4 2021 (59%), it’s consistent with an upward trend since the pandemic low of 47% in Q1 2021.