The year 2018 was a record year for small business (SMB) optimism in the U.S., driven by economic strength, government policy and continued efforts among the financial technology (FinTech) and financial services (FinServ) communities to introduce new tools for entrepreneurs — to make running their businesses easier, more efficient and more profitable.
The latest analysis from Bank of America, published on Monday (Dec. 3), suggested that this optimism refuses to waver at the close of the year. The Bank of America Business Advantage “Fall 2018 Small Business Owner Report” found continued positivity among the nation’s small businesses, and in their outlook for the months ahead.
Yet, there remains one pressing challenge for small business owners: a tight labor market, a key hurdle that may slow down SMBs’ growth ambitions.
In a survey of 1,000 small business owners in the U.S., Bank of America found that 80 percent remain confident that their revenues at the end of 2018 will be larger than they were at the end of 2017. Most predicted revenues to increase in 2019, and more than two-thirds are planning to expand — both figures up from this time last year.
According to researchers, several key metrics reflecting small business strength in the U.S. are at the highest they have been in three years. Most SMB owners also remain confident in the continued improvement of the national economy, as well as local economies.
Overall, the vast majority of small business owners said the stress of owning their own business has been worth it — and 90 percent would recommend entrepreneurship to others.
However, the nation’s labor market may disable small businesses from taking the proactive steps they need to take to maintain their growth momentum.
According to Bank of America, a limited talent pool — coupled with a range of other employment-related factors — is one of the biggest challenges for U.S. small businesses today. Only 27 percent plan to hire more staff in the coming year (though, this is up from just 16 percent this time last year), and half of the companies that do want to expand their staff levels said the tightened labor market has had an effect on their ability to find qualified professionals.
The tightened labor market is also making it more difficult for small businesses to retain the staff they have. According to the survey, employee turnover has affected nearly one quarter of all SMBs. Eleven percent said they had lost 10 percent or more of their workforce.
“Small business owners are eager to expand their businesses and take advantage of a healthy economy,” said Bank of America’s Head of Small Business Sharon Miller in a statement. “While we are seeing an increase in hiring plans and loan applications, today’s competitive job market has created a challenging environment to attract and retain small business talent.”
Also topping the lists of small business concerns are trade policies (cited by 43 percent of small businesses as a top economic concern), interest rates (44 percent — up from fall 2017 levels) and healthcare costs (63 percent, also up from fall 2017 levels). Concerns about healthcare costs may create yet another barrier for small businesses looking to retain staff through employee benefits offerings.
There are ways that small businesses are working to keep the staff they have and attract new talent, however.
Bank of America found that one quarter of SMBs are looking to introduce greater flexibility for their workers in terms of hours, extra time off and location. Nearly the same (23 percent) said they are using social media more actively in their hiring efforts.
Only 17 percent said they are offering hiring salaries, but 83 percent did tell researchers that they plan to offer employees some kind of holiday season perk. Half noted that their offices will be closed at some point during the holidays, while 41 percent said they are offering flexible hours or vacation time during this season. More than one-third of SMBs are offering their staff holiday salary bonuses.