Many SMBs are flying blind on where their customers actually come from—and the ones that track things (formally, not just by asking around) grow revenue at more than double the rate of those that don’t. While growth at digital and hybrid firms outpaces that of companies relying on physical stores, the channel mix alone doesn’t appear to determine outcomes. In fact, whether a business tracks where its customers originate and invests accordingly correlates with its growth.
In general, SMBs’ revenue growth in the United States outpaced the broader economy last year. The average annual rate was 9.5%, more than double the nominal GDP growth rate of 4.7%, as reported by the U.S. Bureau of Economic Analysis. Half of all SMBs exceeded that GDP benchmark. But not all SMBs performed well. One in three saw their revenue hold flat, and 16% reported a decline.
The SMBs that grew share a consistent profile. They operate across digital channels, know where their customers come from and plan to invest more in the channels where demand is building. The declining ones more often lean on a single in-person channel and have more limited visibility into customer acquisition.
These are some of the findings from the latest installment of the SMB Growth Monitor, a PYMNTS Intelligence exclusive series. This edition is based on a survey of owners, founders, vice presidents and executive directors from 526 U.S. SMBs, conducted May 1–24, 2026. The data suggests that SMBs that operate across digital channels and track the effectiveness of their customer tracking efforts grow at meaningfully higher rates compared to those that don’t.
The Digital Sales Shift
Digital channels drive nearly half of all SMB sales.
Roughly six in 10 SMBs sell via their websites, making those one of the most widely used channels alongside the physical store. Digital channels account for 57% of total SMB sales on average, while physical channels, including brick-and-mortar stores and other in-person sales, account for 41%. Within physical channels, the store alone drives 28%. Websites follow at 18%, and other channels account for the remaining 2%.
More than half (52%) of SMBs use social media, but it doesn’t always function as a commerce channel, generating only 13% of sales on average. Third-party delivery aggregators such as DoorDash or Instacart account for 2% of annual sales on average, and SMBs’ own mobile apps account for 6%, though both channels are seeing usage grow quickly among existing customers.
SMBs fall into three channel types: physical-led if more than 75% of sales come from physical stores, digital-led if the same share comes from digital channels, and hybrid if neither channel reaches that threshold.
Under this framework, 61% of SMBs are hybrid, 26% are digital channel-led and just 13% are primarily physical store-led. The physical store is certainly a key way to fulfill demand, but for most SMBs, it’s not the primary source of it.
Growth Favors Digital
Growth for SMBs focusing on using digital channels outpaces SMBs focused on physical channels.
More than half (56%) of digital-led SMBs grew their revenue in 2025, as did 51% of hybrid SMBs, while only 42% of physical-led firms did so. Physical-led businesses also reported the highest rate of revenue declines at 20%, compared with 15% among digital-led and hybrid businesses. This pattern holds across revenue tiers in the data.
The channels a business focuses on are linked to how old that business is. Newer SMBs (operating less than three years) are more likely to be physical-led (21%) than businesses with operations in the three-to-10-year range (8%). Among the most mature businesses, those operating for 10 or more years, 64% fall into the hybrid/digital storefront group, having had years to gradually add channels. Among SMBs in the three-to-10-year age range, 61% are hybrid. They have a more diversified channel mix than newer businesses, but a lower share of digital-led channels than the overall sample.
Mobile apps and delivery platforms are leading sales channel growth.
The sales channels with the highest growth momentum in 2025 were mobile apps (58% of users reported increased sales) and third-party delivery aggregators (57% said the same). Physical stores showed lower momentum, with only 37% of businesses with brick-and-mortar locations reporting that sales via the channel increased.
Telephone sales trailed all other channels at 24%. Notably, a channel’s momentum isn’t linked to how many SMBs have adopted that channel: The channels used by the fewest SMBs are the ones where existing users are most likely to be growing.
The role of digital channels varies across industries.
Digital channels serve different functions depending on the industry. In professional services and retail, digital accounts for more than half of sales and roughly one-third of new customers. In hospitality, digital also accounts for more than half of sales (59%), though its share of new customers is closer to 33%. These channels are central to both finding buyers and closing the transaction. In personal services, digital accounts for about a quarter of each, while in-person channels account for most of the remainder.
In construction, digital brings in 33% of new customers and accounts for 40% of sales. This suggests a closer alignment between acquisition and transaction than in most other industries, where digital sales tend to run well ahead of digital’s share of customer acquisition.
Built for Digital
Most SMBs launched with digital channels already in place and continued to expand them in the years that followed.
Looking back on their earliest days, nearly half (47%) of today’s SMBs say they already had both physical and digital channels in operation at the time of their launch. Another 23% launched digital-only. In total, 70% launched with at least one digital channel. Personal services is the exception: More than half (55%) of those businesses launched with physical stores only, well above the all-SMB average.
Firms that now sell from physical stores usually had at least one brick-and-mortar location from the start. Among those that didn’t, 42% added a store in an effort to reach a key growth milestone.
For all SMBs with a physical store, opportunity (finding a suitable location at the right price) was the top reason for establishing a brick-and-mortar presence (42%), followed by product or service fit (40%) and operational need (39%). One in three firms cited customer demand as a key reason. For those firms, physical expansion may have followed proven demand rather than preceding it.
The Tracking Advantage
SMBs misjudge where new customers come from, costing them opportunities to grow.
Word of mouth is the most common way SMBs acquire new customers, cited by 62% of firms surveyed. Paid channels are also widely used, particularly among growing businesses. Thirty-nine percent of growing SMBs used paid search to attract new customers in the last year, versus only 16% of declining ones. A similar pattern holds for online reviews (41% vs. 29%), email marketing (38% vs. 29%) and Google Business Profile (35% vs. 27%). In effect, firms seeing improvements use these methods far more than those that are struggling. This data doesn’t demonstrate causality, but instead suggests how growing and declining firms appear to use these channels at meaningfully different rates.
Notably, declining businesses rely on word of mouth to attract customers more often than growing ones, at 72% versus 58%. That disparity may suggest that struggling firms are more concentrated in informal marketing channels.
There is often a gap between the customer acquisition sources SMBs rely on the most and the ones they expect to matter most going forward. Nearly half (48%) of SMBs expect digital marketing to be the most important source of new customers in the next year, but in 2025, it was only the top source for 34%.
Walk-in foot traffic was the top source for 29% of SMBs last year, but only 12% expect it to be the most important customer acquisition channel in the next year. For some firms, that expectation gap may reflect pure optimism about digital’s trajectory. For others, it might be associated with a lack of reliable tracking data on the effectiveness of different channels.
The tracking gap
The most common way SMBs track the effectiveness of their acquisition channels is by asking customers directly, which 51% of SMBs do. Forty-three percent use analytics tools such as Google Analytics and social media insights, 30% use customer relationship management (CRM) or loyalty data and 15% use referral or promotional codes. About one-third of SMBs (32%) use informal observation through conversations with customers, and 9% rely on it exclusively, with no analytics, CRM or codes. Only 8% have no tracking mechanism at all. Among the SMBs that rely on informal observation alone, 34% saw increased revenues in 2025, compared with 22% of those with no tracking method.
SMBs that do track the effectiveness of different acquisition channels are largely confident in the accuracy of the data they receive. Seventy-three percent are very or extremely confident, while just 22% are somewhat confident and 5% are slightly or not confident. Still, more than one in four don’t feel fully confident in their tracking data.
Tracking is associated with revenue growth. Among SMBs with no way to track, 22% grew their revenue in 2025. Among those that only track informally, 34% did. But among firms with formal tracking in place, 51% saw growth in 2025.
Just over half (52%) of these firms plan to invest more in their actual top source of customer acquisition. However, the highest growth rate of any group, at 58%, belongs to the 39% of SMBs that have formal tracking systems but that invest in an acquisition channel other than their top source. While the data doesn’t prove causality, growth may be more associated with having a measurement in place than with precisely targeting the highest-performing channel.
Where SMBs Invest Next
SMBs are betting on mobile apps and social media more than physical stores.
SMBs currently using mobile apps want to step up their digital presence, with 73% planning to expand use. Similarly, 69% of social media users plan to lean in more to this channel. Fifty-seven percent of those on third-party marketplaces such as Amazon and Etsy say the same, as do 54% of aggregators. SMBs with physical stores are the least likely to want to expand the channel, at just 40%. Across all SMBs, only 6% plan to add a physical store. The channels SMBs most want to expand also tend to be the ones showing the highest per-user revenue growth, suggesting that investment intent and momentum may be moving in the same direction.
Digital marketing is the only customer acquisition source where SMBs expect a larger share next year than they report today: 34% say it generates the most new customers today, and 48% expect it to be the top source next year. Walk-in foot traffic runs in the opposite direction. It is the actual top source for 29% of SMBs today, but only 12% expect it to lead next year. Among those SMBs where walk-ins are the top source of acquisition, only 9% expect it will keep the top spot, the lowest retention of any category.
One in three SMBs has no plans to add any new channel in the next 12 months. For providers of payments infrastructure, financial services and marketing tools, the clearest opportunity may lie with the 8% of SMBs with no customer tracking in place and the 39% whose expected top acquisition source does not match what is actually delivering today.
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Methodology
“The SMB Growth Gap: What Leaders Track That Others Miss,” the newest installment of the SMB Growth Monitor, a PYMNTS Intelligence exclusive series, is based on a survey of owners, founders, vice presidents and executive directors from small and medium-sized businesses across the United States. The survey was conducted from May 1–24, 2026. This report examines how U.S. SMBs sell across channels, attract new customers and whether they can identify which channel is driving new business. The sample comprises 526 SMBs spanning a range of industries, revenue bands, business ages and geographic locations.
