NEW “CHECK UP” SURVEY FOR Q3: Small Business Owners Foresee “Deteriorating” Economic Conditions

By SBE Council at 12 September, 2023, 8:55 am

NEWS

Squeezed by inflation, diminished profitability, and labor and capital constraints, small business owners cut spending. Also, Amazon small biz sellers express alarm about forthcoming FTC action, threatening sales and survival.

FOR IMMEDIATE RELEASE

Washington, D.C. – While the majority of small business owners view current business conditions as generally positive, according to the Small Business & Entrepreneurship Council’s (SBE Council’s) latest SMALL BUSINESS CHECK UP SURVEY for the third quarter of 2023, many are challenged to maintain profitability given inflationary pressures, and the high cost of inputs and operating expenses such as rising gas prices. A significant percentage (52%) report that revenues have not kept pace with inflation, and most (61%) believe economic conditions will deteriorate for the remainder of 2023.  Small business owners rank inflation (57%), economic uncertainty (32%), recession/slowdown (32%), rising interest rates (22%), and high gas prices (21%) as their top five concerns, according to the Q3 Small Business Check Up Survey. The survey was conducted for SBE Council by TechnoMetrica from August 23-25, 2023.

“The relentless squeeze of inflation persists for small business owners as they navigate the tiring balance of increasing prices in order to break even or stay profitable. A significant percentage of small business owners continue to report that their capital and human capital needs are not being met, which means they can’t access the primary inputs for generating needed revenues. Given their downbeat outlook for the remainder of 2023, the broader economy will no doubt be affected by the daunting challenges many small businesses are facing. With 89% of small business owners expressing concern about inflation and 86% worried about an economic slowdown or recession, there will be less risk-taking, innovation and hiring overall, which will hurt local economies as well as the broader U.S. economy,” said SBE Council president & CEO Karen Kerrigan.

Not surprisingly, according to Kerrigan, 59% of small business owners report that they are cutting back on spending. Travel, investments in equipment and technology, and new hiring top the list of areas where spending has been cut.

Still, in areas where some small business owners want or need to spend in order to generate business revenue and growth, that activity is being constrained by external forces. According to the survey, 48% of small business owners report that labor shortages and limited access to skilled labor are hampering operating capacity. Similarly, 49% say the lack of credit or access to capital is impeding business operations and growth. Two-thirds (62%) rate credit availability as fair or poor, while 33% consider it excellent or good.

In terms of sales, the results are mixed for small businesses: 35% have experienced decreased sales in 2023, 40% reported increased sales, and 23% report steady sales. In terms of business profitability to date: 42% report decreased profitability, while 34% have experienced improved profitability.

Tech and Social Media Platforms Generate 22% of Small Business Sales

As with previous SBE Council surveys, the Q3 survey further explores the role of technology and social media platforms in small business branding and income generation. Facebook, Instagram, Amazon, LinkedIn and YouTube round out the top five platforms, yet a diverse array of platform options are used by small businesses to find, service and engage customers. Only 13% of small business owners report they do not use a tech platform or social media to conduct business.

Interestingly, 22% of total small business sales are generated via these platforms and 37% report that platform-generated revenue is 10% or less.  Another 21% report that 11% to 20% of their sales are generated using these tools, and the same number (21%) said platforms account for 21% to 50% of their sales. One in six businesses (16%) report that social media platforms are responsible for over half of their sales.

“Online sales and social commerce continue to grow, yet still represent a modest share of revenue for most small businesses. But every sale is critical to a small business, and entrepreneurs are increasingly and regularly using and testing digital tools to ‘meet customers where they are.’ Business owners and their teams continue to use various methods and tools to engage customers such as in their stores, on their websites, larger company platforms, at special events and farmers markets, and BOPIS in order to meet the ever-changing needs of customers and how they want to shop,” observed Kerrigan.

Amazon and Small Business

According to the survey, 22% of small business respondents use Amazon to sell goods or products. And similar to the share of small business sales generated on tech and social media platforms overall, Amazon accounts for 23% of total sales for these small business sellers. Small business respondents who reported that they sell on Amazon also utilize an array of tools and methods to generate sales, including:

● Their small business websites: 69%

● Social media platforms: 64%

● Other tech platforms like Shopify, Etsy and eBay: 41%

● Their brick-and-mortar storefront: 35%

● Retail or wholesale partners: 33%

● Buy online, pick-up-in-store (BOPIS): 23%

● And larger company platforms like Walmart: 16%

When asked about possible Federal Trade Commission (FTC) action that may break up Amazon or end certain practices, which may result in limited access to Amazon services and its marketplace by small businesses, respondents said that such action would be highly negative for their firms: Nearly 80% of small businesses that sell on Amazon expect negative impacts from potential FTC interference. Specifically, these include: sales disruption (31%), employee layoffs (22%), loss of customer base (17%), potential business closure (16%), and increased sales/marketing costs (15%).

“Similar to comments we received from small business owners in the survey about potential FTC action, we remain confused about what Lina Khan is thinking and why she views the Amazon model and its services as a bad thing. Amazon is merely one of many tools that small business owners use to access the consumer marketplace. Amazon’s presence and market are very beneficial for small businesses, not harmful. For some small businesses, these sales are minimal and for others it is sizeable, but every sale is vital to the survival and growth of small businesses. Not only do we continue to view potential FTC action as ideological and ‘personal’ to Khan, but thoughtless and uninformed, as the consequences are grave for many small businesses in a challenging economy,” said Kerrigan.

Expressing the sentiment of many of the small business sellers who were surveyed, one small business owner noted:

“If we lose our Amazon platform, we will lose extra money coming in that’s much needed. My experience so far is positive with Amazon. If it does break up, it could be very detrimental to my business.”

Moreover, many small business owners expressed bewilderment about the FTC’s forthcoming case against Amazon since potential government actions could hurt, not help, small businesses:

● “I don’t really understand what their [the FTC’s] purpose is in doing this. Thankfully Amazon is only a small percentage of our revenue.”

● “If there is FTC action it could completely disrupt my business.”

● “Overall, we’ve had a positive experience selling through Amazon and it accounts for a decent amount of our sales though not as much as eBay. Losing them would hurt.”

● “I think it’s ridiculous actually. The only people it is going to hurt are small businesses. Amazon won’t be affected by it.”

● “Now why would the government penalize one of the very few big corporations that are trying to give small businesses a leg up???!!! That’s just ridiculous to me!!!”

● “Amazon is a good partner for my business.  I have not heard of this litigation but it would cause me to lay off a valuable person because her main responsibility is e-commerce.”

● “I have had nothing but a great experience.”

● “I’ve had no problem with Amazon. I think that government should just stay out of it.”

● “I think Amazon does a great job helping smaller businesses reach a bigger audience.

President Biden and Government Policy: A Negative Report Card

President Biden does not receive good marks from small business owners, according to the Q3 Small Business Check Up Survey.  For example, “combating inflation” receives a failing grade from 70% of small business respondents. Management of government spending is similarly unfavorable, with 63% giving low grades. Over six in ten (62%) are dissatisfied with President Biden’s handling of the economy, compared to 20% who rate him favorably. Two-thirds blame the Biden Administration for high gas prices.

“There are no policy areas where President Biden receives a good grade. From capital access issues, to high gas prices, small business friendliness and more, the Biden Administration has a lot of work to do to gain the confidence of small business owners. From the start of his Administration, we urged President Biden to continually and consistently listen to entrepreneurs and small business owners. Based on the policy choices and actions of his Administration, small business has largely been cut out of White House discussions on critical issues. The regulatory tidal wave, for example, and intrusive policies that are putting more burdens, red-tape and restrictions on entrepreneurs and small businesses are proof of that,” added Kerrigan.

Access the full Small Business Check Up Survey Q3 2023 here.

The online survey of 535 small business owners (+/-4.3 percentage points) was conducted by TechnoMetrica for SBE Council, August 23-August 25, 2023. Political party breakdown of small business respondents: 32% Democrat, 33% Republican, 33% Independent, 3% Not sure/Refused.

CONTACT: 

Karen Kerrigan, kkerrigan@sbecouncil.org

Raymond Keating, rkeating@sbecouncil.org

SBE Council is a nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For nearly 30 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth.

Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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