Small Business Challenges: 58% “Very Concerned” About the Economy

The pandemic is in the rearview (knock on wood). Consumers are spending and life has returned to something resembling normal.

But a new set of challenges has arrived.

For National Small Business Week, we checked in with hundreds of Main Street business owners around the country. We asked how they’re holding up today and what they hope for the future. What emerged is a portrait of small businesses that face significant headwinds and uncertainty — yet remain optimistic about their success.

• 94% of business owners reported concern about the economy and rising interest rates, which tied as top worries.
• 79% of business owners are still anxious about supply chain issues — the top concern of COVID-era challenges.
• 63% of owners expressed optimism that their business will grow in the coming year.
• Women-owned businesses reported higher levels of concern and were less optimistic about their future.

Click here to see the image in full size

The Economy and Rising Interest Rates Are Top Concerns

For small business owners, two concerns loom large: the economy and rising interest rates. These two issues tied as top worries, with 94% of small business owners either “somewhat” or “very” concerned. However, slightly more small business owners had high levels of concern about the economy.

• 58% of respondents were “very” concerned about the economy.
• 56% of respondents were “very” concerned about rising interest rates and the cost of credit.

Other top concerns included inflation, access to credit and cybersecurity.

• 88% of survey respondents were concerned about inflation, with 47% being “very” concerned.
• 83% of survey respondents were concerned about access to credit, with 37% reporting being “very” concerned.
• 76% were concerned about cybersecurity, with 28% being “very” concerned.

Covid-Era Worries Are Fading

As worries about COVID fade, so do the accompanying business concerns. Though they are still significant worries, problems such as supply chain disruptions are beginning to take a backseat to issues such as the economy, inflation and the cost of credit.

• 79% of respondents were still concerned about supply chain disruptions, but only 32% felt “very concerned.”
• 57% were worried about current staffing shortages or performance, but 34% listed it as only “somewhat” concerning.
• 66% of business owners were worried about hiring new and qualified staff, with 30% naming it as “very” concerning.

Notably, the majority of small business owners (58%) reported that they primarily hire staff through word of mouth referrals. Tapping into this network may give them an advantage. By contrast, only 20% of survey respondents reported that they primarily hire through job posting sites, which are a common tool that larger businesses often rely on.

Summer Hiring Might Be Slow

A small percentage — only 12% — of respondents said they’re looking to hire seasonal employees this summer. It is unclear whether this is due to economic factors or the nature of their business — respondents did not note whether their businesses typically hire seasonally.

• 46% of respondents said they’re fully staffed and not looking to hire.
• 22% said they’re understaffed and looking to hire full-time employees.
• 12% said they were looking to hire seasonal employees.
• 20% were unsure about their hiring needs.

The low demand for summer hires, however, is in line with a larger percentage of small businesses reporting being fully staffed.

Majority of Small Business Owners Feel Prepared to Weather Recession

Predictions of a recession loom, but most small businesses are feeling optimistic that they’re prepared to weather the storm.

• 61% of business owners feel they’re prepared to handle a recession, with 46% saying they’re “moderately” prepared and 15% saying they’re “very” prepared.
• Only 15% of respondents said their business was not prepared for a recession in the next six months.
• 78% felt that their businesses’ financial health was better or about the same as last year.
• 93% predict that the financial health of their business will be better or about the same a year from now.

Many Small Business Owners Face Long Hours, Little Time Off

Being prepared for what lies ahead takes a lot of hard work, and that hasn’t changed in the last year. Most business owners work more than 40 hours a week and many are concerned that the staffing shortages will reduce the amount of time they’re able to take off to recharge.

• 91% of small business owners work more than 40 hours per week, with 36% working 41 to 50 hours, 32% working 51 to 60 hours and 23% working more than 60 hours each week.
• 70% of participants feel they’re working the same number of hours they were one year ago.
• 57% of business owners take one week or less of vacation time each year.
• 12% say they do not take any vacation days.
• 67% of participants expect that staffing shortages will reduce the amount of vacation time they will be able to take this summer, with 20% expecting it will “significantly” reduce their usual amount of vacation time.

Business owners are clearly working hard, but where does their time go? Mostly to day-to-day operations, administrative work and employee management — but that’s not how they want to spend their time. Instead, small business owners want to spend more time on marketing, strategic planning and personal skill development.

• Business owners are spending an average of 35% of their time on day-to-day operations, 19% on administrative tasks, 13% on employee management and 11% on invoicing and accounting.
• Business owners spend an average of 5% of their time on personal skill development but would like to boost that to 9% of their time.
• They spend about 6% of their time on strategic planning but would like to devote around 11% of their time to it.
• On average they spend about 8% of their time on marketing but wish they could spend 13% of their time on their efforts.

Women-Owned Businesses Express Higher Levels of Concern

Female business owners are more concerned about the future. Many were hit hard during the last year and are feeling the effects of increased anxiety.

• 66% of women report being “very” concerned about the economy — 11 percentage points higher than businesses that aren’t women-owned at 55%.
• 61% of women-owned businesses are “very” concerned about the cost of credit — six percentage points higher than businesses that aren’t women-owned at 55%.
• 59% of women business owners are “very” concerned about inflation — 16 percentage points higher than businesses that aren’t women-owned at 43%.

With these concerns at the forefront of their minds, many women-owned businesses are less sure about how a recession would impact them. Many feel that they’re not in as stable a position as they were last year, which makes them less optimistic about the future.

• Nearly one in four (23%) women-owned businesses feel they are not prepared to weather a recession in the next six months.

National Small Business Week Mostly Uncelebrated

National Small Business Week was created to celebrate the businesses that make up the backbone of America. Yet many business owners aren’t planning on participating. Some may not be aware of the week set aside in their honor, while others are more concerned about the start of the busy season.

• 56% of small business owners don’t plan on participating in Small Business Week.
• 26% of participants haven’t started planning for it.
• Of those who are participating, 11% said they were planning on promoting their business on social media, making it the most popular way to participate.

While many small businesses don’t have plans to celebrate Small Business Week, customers can support their local businesses in one important way: by simply being nice.

• 76% of business owners said they prefer a nice customer who buys less to a rude customer who buys more.
• 24% said they prefer a rude customer who buys more.

Voices From Main Street

We asked small business owners what they’ve learned from their business this year and what advice they’d give their younger selves or other business owners just starting out. Here’s a few of the insights they shared.

Find a Support Group

“Start now. Seek out a support group of your peers. If your business uses technology, learn it and be open to change. Be ready to work as owning your own business is the second hardest job next to raising a child.”

“A love and passion for what you do, coupled with faith and dedication will bring about success. Don’t be afraid to fail along the way. Failure brings about growth. Talk to people who are where you want to be, network and surround yourself with the right people.”

Invest in Strategy

“Learn more about business, be trained in employee management and hire/retain an office manager. I spend way too much time WORKING for my business to RUN my business effectively.”

“I should have focused more on building strategy much sooner.”

“Plan, plan and plan. Market, market and market. Develop open and effective communication with customers and strategic partners. Develop sound strategic relationships and partnerships. Value and listen to your customers. Make sure you have good credit and financial stability to grow your business.”

Take Time Off

“Spend more time away from the business. It allows me time to think about future development.”

Take time away from business, even if it’s a small amount of time at any given time.”

Invest in Employees

“Take care of your employees and they’ll take care of business.”

“Not easy to be self-employed, but worth it if you have the right business, the right staff and the right attitude for the ups and downs.”

“Do not try to do it all yourself.”

Value Customers

“Customers are the reason we are here and open…you cannot control how a customer acts… you are only responsible for your own behavior and actions…be courteous and polite to every customer…regardless of the situation you do not know what your customers are dealing with.”

Methodology

We surveyed 329 OnDeck customers between March 29 and April 5, 2023. Seventy-one percent of respondents were male, 26% were female and one was non-binary. 1.5% did not provide their gender. We received responses from business owners in 46 states — the only states not represented were Alaska, Hawaii, South Dakota and Vermont. The top three industries represented were construction (14%), retail (13%) and professional services (13%). Thirty percent of respondents were women-owned businesses, 16% were minority-owned, 8% were veteran-owned and 3% were immigrant-owned. The majority of respondents (74%) had been in business for 10 or more years, while 17% had been in business five to nine years, 9% had been in business between two to four years, and less than 1% had been in business for under two years.