Small businesses are America’s backbone. According to the U.S. Census Bureau, there were around 5.9 million businesses with employees in 2021 and around 27 million nonemployer businesses in 2020. And these numbers haven’t slowed down. In May 2024 alone, 423,945 business applications were submitted.
But funding these ventures without financial assistance can be difficult, especially since small businesses require a significant investment to remain competitive in a constantly evolving market.
Some trends small business owners are exploring to remain competitive are more sustainable practices, using artificial intelligence (AI) to improve operations and adopting digital payment solutions, customer support and more to meet consumer demands.
Bankrate’s key insights on small businesses
- Starting a small business in 2024 doesn’t come cheap. About 56% of surveyed small business owners reported an initial investment of over $250,000 in 2024. Of that, 16% invested between $500,000 and $1 million. (Guidant)
- Digital presence is imperative. 52% of consumers surveyed in Visa’s Digital Transformation of SMBs study say they check out the business’ website before visiting a new business, while over 80% say they feel more motivated to shop if a business has an easy-to-use website.
- 401(k) business financing is one of the most popular funding options. Over half (52%) of small business owners have used 401(k) business financing or Rollovers for Business Startups (ROBS) as their primary source of funding in 2024, even though it comes with significant risk. (Guidant)
- Alternatives to traditional business loans are also popular. Around one in three firms used financing other than credit to fund their businesses. Other types of funding included personal funds, loans from family and friends, grants, equity investments or fundraising. (Federal Reserve Banks)
- Inflation continues to be the greatest challenge. In Q2 of 2024, 55% of small businesses say inflation and rising costs are their biggest challenge — this has been consistent over the past two years. Over a quarter (26 percent) are also concerned about revenue. (U.S. Chamber of Commerce)
- AI to support agility and growth. 49% of small businesses say they plan to try out different AI tools to see which best fit their needs in Q2 of 2024. 74% of small businesses agree that having employees who use AI tools could give them an edge against competitors. (U.S. Chamber of Commerce).
Small business trends for 2024
While the small business landscape continually changes as the economy and consumer spending habits change, there are six trends that business owners are adopting to remain strong through 2024.
Preparation for future threats or disasters
For 60 percent of small businesses in the U.S., cybersecurity is a major concern in 2024, according to the U.S. Chamber of Commerce’s Q1 2024 Small Business Index. These include threats like phishing, malware and ransomware.
Supply chain breakdowns and the possibility of another pandemic came in second, with 58 percent and 54 percent of small business owners citing them as a top concern, respectively.
Though experts say that 2024’s hurricane season could break records for activity, inclement weather and natural disasters aren’t as high a concern for small business owners. Less than half (45 percent) say they’re worried about inclement weather events impacting their businesses, while only over a third (39 percent) are concerned about a natural disaster.
Even so, small business owners have taken steps to help protect their business operations, including increasing staff training on cybersecurity measures (48 percent) and building a rainy-day fund (62 percent).
Opting for more sustainable practices
Sustainability has been on small business owners’ minds for a while now, but the COVID-19 pandemic made consumers more aware of it, driving substantial changes.
Research by Capgemini found that 79 percent of consumers intended to change their purchasing habits in the aftermath of the pandemic, as it made them more aware of the scarcity of natural resources. This includes basing purchases on social responsibility, inclusiveness or environmental impact.
According to Bank of America’s 2024 Small Business Owner report, 81 percent of small business owners have implemented sustainable business practices, including minimizing paper and plastic usage, offering a hybrid work structure to reduce transportation needs and working with sustainable vendors and suppliers.
Visa’s Global Back to Business Study also found that 68 percent of consumers said a business’s sustainability practices have at least somewhat impacted their purchasing decisions and 77 percent are willing to pay more for a product or service to ensure it’s sustainable.
AI adoption
While Guidant’s 2024 Annual Small Business Trends Report found only 17 percent of surveyed small business owners have incorporated AI into their businesses, interest in this technology remains high. The Small Business Index for Q2 2024 found that 49 percent of businesses surveyed plan to try AI tools.
Similarly, in 2023, as many as 91 percent of small business owners said they were at least “somewhat likely” to consider automation through AI services, like ChatGPT, to stay competitive, according to a Visa Global Back to Business Study.
Small businesses are always going to be, and they always have been the first adopters of technology. Technology has always been the great equalizer. You can be one person competing with a corporation, anywhere in the world, and technology allows you to do that. So, when there’s a new part of technology, like AI, it just stands to reason that small businesses would also be first adopters.
— Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce
Veronica Fernández, senior vice president and head of Visa Commercial Solutions in North America, says that, according to Visa’s latest data, “65 percent of surveyed small businesses in the U.S. are optimistic that AI will positively impact their business, with 63 percent stating they trust AI to help build their business.”
Fernández points out that AI is helping improve results for small businesses, especially as they face challenges like optimizing operations since economic conditions remain uncertain and the credit market tightens.
“A few examples of how AI is accelerating small business success includes identifying and assessing fraud, accelerating bookkeeping and enhancing financial analysis,” Fernández adds.
Prioritizing social media marketing and e-commerce
A solid digital presence has been key for small businesses to bring in new customers and increase revenue. Small businesses are utilizing social media for low-cost marketing, and a sales platform, as platforms like TikTok and Instagram, increase brand awareness and allow businesses to connect directly with consumers.
E-commerce is equally important. Over half of consumers surveyed by Visa said they would prefer to shop exclusively online, while over 80 percent say they feel more motivated to shop at businesses that have an easy-to-use website and digital loyalty programs.
Bankrate insight
Customer experience
A positive customer experience can go a long way for small businesses. According to Zendesk, 60 percent of consumers have purchased from a brand based on the service they expect to receive, while a whopping 73 percent will switch to a competitor after multiple bad experiences.
Small businesses are enhancing customer experience in 2024 by boosting engagement through frequent sales and discounts, digital marketing, personalized customer interactions and more.
Digital payments
Consumers want a seamless shopping experience, and that includes digital payments. According to Visa’s Digital Transformation of SMBs, small businesses that incorporated digital payment methods experienced an average revenue increase of 8 percent while also reducing costs.
“Digital wallets are the fastest growing financial instrument for both individuals and businesses and are expected to reach close to five billion users by 2025,” Fernández says. “As consumers expect to be able to make purchases when and how they want, small businesses that still don’t accept digital wallets may find themselves disappointing their customers,” she adds.
Bottom line
As we move through 2024, trends with small businesses will likely shift, especially if there are changes in inflation or the overall health of the U.S. economy. Even so, adopting AI, digital payments, social media and e-commerce is unlikely to fade away. If anything, these areas are likely to increase in popularity as more small business owners use them to effectively and efficiently serve their customers and drive sales.
Frequently asked questions
-
This year’s small business outlook is looking quite promising, with 67 percent of owners feeling positive about the overall health of their business in Q2 of 2024, according to the Small Business Index. Nearly three-quarters (73 percent) are comfortable with their current cash flow, and small business perceptions of the national and local economies are higher than in previous years.
-
There are several profitable industries and businesses right now. Some of the top industries include retail, food and restaurants, healthcare, manufacturing and professional services and real estate.
-
Some of the easiest businesses to start are freelancing or consulting services, online coaching, online clothing consignment stores, online shops of any kind, childcare (babysitting), education (tutoring) and pet care (dog walking, pet sitting, etc.).
Read the full article here
The post Small business trends in 2024: What we know so far appeared first on Budget Busters Hub.