While resiliency and confidence are driving small and mid-sized businesses (SMBs) to think positive in the face of current market challenges, these same companies warn of rising costs, and the need for more government support and better financing options to weather the storm over the next 12 months.
The data comes from Sage’s “Small Business, Big Opportunity?” report, the largest study of its kind examining how SMBs are surviving and thriving despite current public health, economic and societal challenges. Among the barriers, the report says, are rising costs of living and the ongoing impact of the pandemic. Sage commissioned the study to examine the confidence of SMBs, surveying more than 13,000 businesses across 11 countries worldwide, to understand their experience during the pandemic and their outlook for the future.
Key themes from the study include:
- SMBs are a critical engine for overcoming global economic challenges, but are not invincible and still face headwinds
- The majority of SMBs believe the aftermath of the pandemic can be an opportunity to promote more sustainable development
- COVID has unleashed a new generation of toughened-up entrepreneurs
In responses from the more 2,000 US-based businesses versus the overall global average, the survey found:
- Confidence among US decision-makers is higher than average regarding the upcoming 12 months, whereby 73% feel confident about the success of their business, compared to 69% globally.
- In terms of revenue over the next six months, stateside SMB decision-makers are more positive than the global average, as 54% expect revenue to increase, compared to just 49% globally.
- Moreover, 54% also expect to see their employee numbers increase over the next year, compared to 46% globally. This includes as many as 22% who expect to see a significant increase, while only 13% globally expect the same.
Aziz Benmalek, Sage’s EVP of Partners & Alliances and the interim President of Sage North America, says SMBs continue to be the backbone of a global recovery. “If we leave small and mid-sized businesses behind, we put the global economic recovery at risk. Be it rising costs and inflation, skills shortages or lack of access to finance, we need to make sure that the businesses at the core of the economy are given the right resources and support to survive and thrive in the year ahead.”
Key global research findings show that rising costs and concerns about inflation are keeping businesses up at night:
- Over a third of businesses still are not operating as normal due to the pandemic and now are facing the prospect of further challenges
- 39% expect rising inflation and cost pressures, including rising rent and utilities, to persist as the main risks to their business in the year ahead, significantly impacting growth prospects
- Nearly 10% of SMBs, representing more than 6.1 million jobs in the markets surveyed, are at risk of disappearing completely
Still, business confidence remains strong globally, despite—and often because of—ongoing pandemic pressures. Most businesses globally feel more resilient and better prepared to overcome major barriers now than before the pandemic because of the adaptations they have made over the period, including investment in technology:
- 69% of decision-makers feel confident their company will be successful 12 months from now, compared to 58% last year
- Optimism is starting to filter through into profitability, with 81% of SMBs expecting to be at least somewhat back to pre-pandemic levels of profitability
- By sector, the businesses most optimistic about their success 12 months from now are in the nonprofit, healthcare, education, financial services, construction and technology industries
SMBs expect to increase hiring and remain optimistic about staffing over the next 12 months:
- 46% expect to hire more people in 2022—on average, SMBs expect their workforce to increase by 12%
- This could lead to the creation of a potential 3.8 million new jobs, including 1.6 million jobs in the US
- 35% of SMBs saw their workforce shrink in the previous year, but 65% are confident they will be able to meet their staffing needs over the next 12 months
Government and financial support are crucial to business survival:
- Government support was identified as the single most important resource to contribute to SMB growth over next 12 months (31%), with financing (25%), including bank loans and grants, and better management of cash flow (25%) also noted as key factors to success
- One in five highlighted lack of government support as a key challenge over the past 12 months
- The businesses that received government financial support (21%) feel more resilient and better prepared than those that did not receive funding
A majority want to seize the opportunity for more sustainable development:
- 86% of SMBs expect to make a change to become more sustainable in the year ahead, with companies founded during COVID more likely to make this change
- 55% identified sustainability as being important to their business, with 17% describing it as central to what they do
- Around 80% are feeling pressure to reduce their environmental impact, with pressure coming from customers (31%), the government (25%), employees (24%) and the supply chain (22%)
- A majority of SMBs believe that the aftermath of the pandemic can be an opportunity to promote more sustainable development in their countries and local communities
- Out of the darkness, a new generation of confident business owners has emerged
Businesses founded during the pandemic report larger-than-average barriers to success, but remain more confident about the growth they can achieve in the upcoming year:
- 42% of businesses founded during the pandemic were by young people (aged 18-34), with the principal decision makers more likely to be men (61%)
- These “Generation COVID” businesses are much more adaptable, with less than one-third stating that the pandemic negatively impacted their operations
- These “Generation COVID” companies are more confident they will generate revenue growth in the next six months (57%) versus those founded pre-pandemic (48%)
- But in comparison to businesses founded pre-pandemic, fewer “Generation COVID” SMBs are satisfied when it comes to their current staffing levels (56% vs. 65%), ability to recruit talent (51% vs. 58%), and productivity (58% vs. 68%)
Click HERE to access the full report and regional findings.
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