Guardedly optimistic describes the mood on Main Street with the second quarter closing in, as businesses see a year of cash flow struggles ahead and inflation pushing the pandemic off its perch as their big worry.
What’s clear from new data is that small- to medium-sized businesses (SMBs) that have or are taking steps to upgrade payments capabilities to ensure cash flow are more upbeat about their future.
They’re also evolving their strategies to factor in price hikes to keep pace with inflation and wage increases to help ease a persistent labor shortage that’s impeding a comeback.
Surveying over 500 Main Street businesses taking divergent paths in their individual digital transformations, the Mainstreet Health Survey, a Melio and PYMNTS collaboration, found that success for SMBs is increasingly defined by digital, or its absence.
Nearly six in 10 Main Street SMBs (57%) said their revenue outlook for this year has adjusted downward slightly but remains a healthy 10% above the 46% that said the same in 2021.
Only about 5% of SMBs surveyed feared they won’t be in business within two years, compared with the 20% who said this in 2020.
Hurdles to recovery remain, however, as research found that cash reserves are cause for concern. The study found that almost half of the SMBs “have the equivalent to 30 days of revenue in cash access,” adding that “while only 13% of online sellers do not have access to cash, that number rises to 25% when looking at store sellers.”
Limited access to cash sources “more than doubles the chances of being a firm at risk.”
See also: For Main Street Businesses, Innovation and Optimism Mark a ‘Return to Normal’
Physical and Digital Differences
PYMNTS found notable differences between the 2022 strategies of SMBs selling primarily online as compared to Main Street retail businesses that might be operating two doors down.
Per the study, “Main Street [businesses] selling mostly online are more likely to invest in the next months,” with three-quarters (74%) of online sellers planning digital software investments in the coming three months, and 47% of that group also eying equipment upgrades.
Compare that to Main Street SMBs whose primary business is physical retail, of which 57% said they will spend on digital connectivity in that timeframe, with 32% focused on equipment.
Fifty-nine percent of retailers currently deriving most of their sales in-store plan to keep that focus.
Read also: 25% of Main Street Businesses Plan to Add BNPL in Next 12 Months
“There is still optimism, there is still innovation and for small business, there’s been a real mindset shift in the past 12 months — and we’re seeing the tailwinds now,” Melio Chief Business Officer Prashant Gandhi told PYMNTS.
Per the latest survey, “Firms making an even share of their sales online and in-store are generally more optimistic, [and] 62% of them expect a revenue increase in 2022. SMBs selling mostly in-store are also slightly more optimistic than their peers selling mostly online.”
Restaurants, hotels and personal service businesses express some of the highest confidence. Accordingly, 30% of these SMBs expect to increase wages and hire more employees in 2022.
See also: Two-Thirds of US Main Street Businesses Show Optimism Despite Inflation, Economic Uncertainty
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