Operations, Environment & Expectations
Small Business Operations: Most say their business health and cash flow are good
About two-thirds (64%) of small businesses say the overall health of their business is very or somewhat good, stable from levels last quarter (66%) and consistent with levels from Q4 last year (64%). Two-thirds (67%) of small businesses say they are somewhat or very comfortable with their current cash flow, down slightly from last quarter (72%) but consistent with the reading from this time last year (67%). This slight decline in comfort with cash flow comes from the decrease of small businesses saying they are very comfortable (21% in Q4 vs. 26% in Q3 2023) with their cash flow.
Small businesses are also slightly less likely to say they have increased staff in the past year compared to last quarter (17% vs. 23%, respectively). The largest small businesses (20-500 employees) continue to be more likely than those with fewer employees to say they have increased their staff over the past year. Additionally, small businesses that have been in operation for 10 years or less are more likely than those that have been in operation for more than 20 years to say they have increased staff in the past year (20% vs. 9%, respectively).
This quarter, reported outlooks on business operations vary more by sector than they have in the past few quarters. While perceived business health was consistent across all sectors last quarter, more small businesses in the retail sector now say their business is in good health than those in services this quarter (69% vs. 56%, respectively).
Manufacturing small businesses are more likely to report staff increases. When it comes to reported increases in staffing over the past year, small businesses in the manufacturing sector are more likely than those in any other sector to say they have increased their staff (28% vs. 13%-17%, respectively).
Troy Web Consulting, Troy, NY
Small Business Environment: More small businesses see a weakening economy
This quarter, small business owners’ perceptions of the economy have worsened and closely resemble attitudes at the beginning of the year. Twenty-five percent of small businesses say the U.S. economy is in good health, and 30% say their local economy is in good health, both down eight percentage points since last quarter.
While perceptions of the national economy are consistently down, one-quarter (25%) of small businesses say the U.S. economy is in good health. Across regions, although readings in the Midwest and South are stable, those in the Northeast and West have significantly declined from last quarter (by 16 percentage points and 14 percentage points, respectively). By gender of ownership, male-owned small businesses are more likely than female-owned small businesses to say either the U.S. economy or their local economy is in good health.
This quarter, fewer small businesses report that competition has increased over the past six months (27% vs. 34% in Q3). Now, more than half (56%) of small businesses say that competition from smaller or local companies has stayed about the same versus six months ago, up by eight percentage points since Q3. Small businesses’ perceptions of increased competition are consistent across business sizes.
More small businesses now report that the time or resources spent on completing licensing, compliance, or other government requirements has stayed the same versus six months ago (57% vs. 51% in Q2 and Q3). Small businesses with 20-500 employees are now more likely than those with 5-19 employees or fewer than five employees to say the time or resources spent on compliance has increased compared to six months ago (52% vs. 37% and 29%, respectively).
Small Business Expectations: Small businesses continue to have high optimism about the future
Compared to small businesses’ muted perceptions of the economy, their expectations for the future continue to be optimistic and generally consistent with readings from last quarter.
Two in five (40%) small businesses report that they plan to increase staff in the next year, unchanged from last quarter and similar to levels reported from mid-2022 to early 2023. Another two in five (42%) small businesses say they plan to increase investment in the next year, generally unchanged from the start of the year.
While self-reported plans to increase investment are consistent by gender of ownership and number of employees, male-owned small businesses are more likely than female-owned small businesses to say they plan to increase staff next year (44% vs. 34%, respectively).
By size, small businesses with 20-500 employees are more likely than those with fewer than five employees to say they plan to increase staff (52% vs. 37%). By sector, small businesses in professional services are most likely of all sectors to say they plan to increase staff next year (49% vs. 36-38% for others, respectively). Small businesses in the professional services sector are also more likely than those in services to say they plan to increase investment (49% vs. 33%, respectively).
Overall, 65% of small businesses expect revenue to increase over the next year, down slightly from record-high higher revenue expectations the last two quarters (when 71% expected increased revenue). Small businesses are more likely to say they expect next year’s revenue to increase if they have younger owners or are a newer business. Small businesses with 20-500 or 5-19 employees are more likely than those with fewer than five employees to say they expect revenue to increase next year (73% and 71% vs. 60%, respectively).