Small businesses in the U.S. are feeling optimistic as 2024 begins. According to a survey by American Express, 85% of small businesses reported success in achieving their 2023 goals. Gina Taylor Cotter of American Express noted, "Even in uncertain economic conditions, small businesses continue to demonstrate resiliency and dedication."

The sentiment is echoed in a survey by Slack, which found that 71% of small business owners are optimistic about their business this year. However, challenges remain. About 38% of owners are more worried about 2024 than they were about 2023.

The National Federation of Independent Business (NFIB) reported a significant jump in their Small Business Optimism Index. The index rose to 89.7 in April, marking its first increase this year. Bill Dunkelberg from NFIB confirmed, "Cost pressures remain the top issue for small business owners."

Despite inflationary concerns, the urge to grow is strong. Fifty percent of respondents in the American Express survey plan to grow or expand in 2024. But hiring remains tough. Only 28% said they plan on adding employees, struggling against larger companies' more competitive salaries.

Flexible work options are a popular retention strategy, with 57% of businesses prioritizing it. This adaptability is crucial, given the tight job market.

New data also highlights record-breaking new business applications. Gusto's survey revealed a 49% increase in new businesses started by women. Interestingly, 44% of these entrepreneurs managed their startups while holding another job.

The American Express Amex Trendex survey shows growing satisfaction among small business owners: 95% are happy with their decision to start their own business. This satisfaction persists even though inflation remains a critical concern. Labor costs, commercial insurance, and goods and input prices are particularly challenging.

Key Challenges Facing Small Businesses

Inflation remains a formidable challenge for small businesses. The NFIB reported that 22% of small business owners cite inflation as their most pressing issue. NFIB Chief Economist Bill Dunkelberg emphasized, "Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees."¹

Beyond inflation, labor quality is another critical challenge. Nineteen percent of small business owners identified labor quality as a top concern. Small businesses find themselves at a disadvantage compared to larger corporations, which can offer higher salaries and more substantial benefits packages. This disparity is evident in American Express's survey, where only 28% of small businesses plan to hire more employees in 2024.

Employee retention further complicates matters. Larger businesses lure away potential talent and make it challenging for small businesses to hold onto their existing workforce. However, small businesses are employing creative strategies to counteract these challenges. Flexible work options have emerged as a key retention tool, with 57% of businesses adopting this approach.

Inflation has multifaceted impacts, affecting various aspects of small business operations. Labor costs remain one of the most significant inflationary pressures, with 81% of small business owners indicating it as their primary concern. Other concerns include:

• Commercial insurance (68%)
• Goods and inputs (67%)
• Employee benefits (63%)
• Access to capital (57%)

The MetLife & U.S. Chamber of Commerce Small Business Index underscores this scenario, noting that 52% of small business owners rank inflation as their top concern. However, it also shows some silver linings. For example, 38% of small business owners have a positive outlook on their local economies, up by 8 points since the last quarter.²

Despite these hurdles, the entrepreneurial spirit remains undaunted. An impressive 95% of small business owners, according to American Express, are satisfied with their decision to start their own business. This satisfaction extends even as they deal with the high costs of labor and goods.

Growth and Expansion Plans

Survey data presents a clear picture: growth and expansion are top of mind for many small business owners, with 50% planning to grow or expand their operations in 2024. Yet, the hiring front tells a different story. Only 28% of small businesses plan to add more employees, reflecting the ongoing struggle with labor quality and retention against better-resourced larger companies.

Capital investments are a cornerstone of these growth plans. NFIB reports that 56% of small businesses have made capital outlays in the past six months, signaling a commitment to sustaining and growing their operations. Further reinforcing this trend, 22% of small business owners plan to make capital purchases in the next three months, showing a decisive move towards bolstering their asset base and infrastructure.¹

In an environment where doing more with less has become the norm, technology adoption is skyrocketing. Small businesses are leveraging new tools to enhance productivity and efficiency. Microsoft Copilot, for instance, offers promising prospects for businesses aiming to streamline processes and improve team collaboration. Capabilities such as task automation via custom copilots, and enhanced project management through tools like Microsoft Planner, are pivotal in driving operational efficiencies.

Fixed investment plans also remain vital. A WSJ/Vistage survey reveals that 34% of small businesses plan to increase their fixed investments over the coming year, an indicator of long-term confidence in their growth trajectories despite inflationary and economic pressures.³

Balancing between growth ambitions and pragmatic employment strategies is the hallmark of the small business outlook in 2024. Technology adoption, strategic investments, and the ever-adaptive nature of entrepreneurs underscore a resourceful and hopeful year ahead for small businesses across the U.S.

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1. Dunkelberg B, Wade H. NFIB Small Business Economic Trends. National Federation of Independent Business; 2023.
2. MetLife & U.S. Chamber of Commerce. Small Business Index. U.S. Chamber of Commerce; 2023.
3. Vistage Worldwide, Inc. The Wall Street Journal/Vistage Small Business CEO Survey. The Wall Street Journal; 2023.