They have had the fortune of working with small businesses for more than a decade and have observed firsthand the impact these businesses have on their surroundings. This encompasses the people they employ, the communities they serve, and their contribution to the overall economy.
One notable small business, and it’s important to note that they are a QuickBooks customer, is High Five Events in Austin, Texas. Starting with a small event, they have developed a team that organizes major events such as the Austin Marathon, fostering community unity.
Small Businesses in Focus
In recognizing the significance of small businesses, a 2022 survey of 8,000 Americans revealed that 73% believe small businesses contribute to improving their communities. This sentiment aligns with the fact that small businesses constitute 98% of all U.S. businesses, employing more than a third (36%) of the American workforce.
Despite the ongoing rapid formation of small businesses, the job creation trend is on the decline. Even with a substantial increase in new business applications, surpassing 5 million in 2022 compared to 2.1 million in 2005, the percentage of new businesses with employees during this period decreased from 10% to approximately 8%.
The shift we’re witnessing can be attributed, in my opinion, to the specific challenges entrepreneurs encounter in obtaining financing. The combination of record inflation and high interest rates adds an extra layer of difficulty to this scenario.
The recent discoveries in the Intuit QuickBooks Small Business Index Annual Report fundamentally demonstrate the interconnected nature of these macroeconomic issues and business growth.
Apart from dealing with inflation, business owners are facing a more challenging financing environment. Small businesses are presently twice as inclined to rely on their personal savings for funding compared to seeking loans from banks or other commercial lenders. The survey revealed that over half (58%) of U.S. small business owners have self-funded their businesses, often by working additional jobs.
How Entrepreneurs are Adapting
To overcome these challenges and foster growth in terms of both revenue and workforce, business owners must make the most of the various resources and tools at their disposal.
Being strategic and informed about business banking is crucial. Recent data indicates that selecting the right banking partner can determine whether a business can access capital. Small businesses that collaborated with well-financed banks before the 2022 interest rate hikes received more funding compared to those associated with less well-financed banks. Recognizing this, it’s essential to stay informed and pose a few fundamental questions when seeking the appropriate bank.
Take, for instance, whether the bank has FDIC insurance. Does it provide a competitive annual percentage yield? What about fees or a minimum balance requirement? Can the bank assist with various business functions, such as payroll, credit card processing, automated bill pay, or instant payments? It’s crucial to seek clarity on these aspects before reaching a decision.
Boosting Small Businesses with Digital Tools
Businesses should harness the potential of digital tools. As per our recent Annual Report, over half (55%) of small businesses that utilize digital technology to manage eight or more areas of operations experience revenue growth. However, this figure drops to 31% for those using digital tools in up to two areas only.
The substantial adoption of digital technology doesn’t just contribute to revenue growth; it also supports employment. Twenty percent of businesses with high adoption report an increase in their workforce, while fewer than 1 in 10 low adopters report the same. Moreover, many digital tools now incorporate AI to enhance efficiencies, automate operational tasks, aid decision-making, and minimize human error—providing significant benefits for small businesses.
Lastly, collaborating with an accounting professional can serve as a valuable asset in guiding businesses through the current macroeconomic landscape. According to our report, over 80% of small businesses affirm that their accounting professionals have played a crucial role in minimizing the impact of inflation on their business.
By ensuring the maintenance of accurate and up-to-date records, covering aspects from income to expenses and deductions, hiring an accountant and outsourcing bookkeeping can result in time and cost savings for small businesses. On average, small businesses estimate that having an accountant saves them $39,000 each month.
Summary
As the upcoming year poses potential ongoing economic challenges, it becomes imperative to cultivate an environment conducive to economic growth and bolster the resilience of small businesses.
