Between the rising costs of living, mixed perceptions of the economy, and more, financial uncertainty impacted us all last year. Small business owners are no exception to these financial stressors, making them acutely aware of the impact these challenges can have on both their business and workforce alike.
Considering this landscape, let’s explore some of the top concerns small businesses experienced in 2023, how employers can support their workforce with these challenges in mind, and predictions for 2024, based on insights from MetLife and U.S. Chamber of Commerce’s Small Business Index.
2023: A Year in Review
In early 2023, many small businesses were concerned about the impact of inflationary pressures on their business. In fact, according to the Q1 Small Business Index, 54% of small business owners cited inflation as their top concern. By Q2, small businesses again reported inflation as the top challenge, this time for the sixth straight quarter. The number of small businesses citing inflation as their number one challenge has held steady since late 2022, remaining a top business concern in Q4, and likely to continue into this year.
For small business employees, on the other hand, MetLife’s deep-dive into small business trends data shows inflation was also a driving source of financial stress, with 45% of individuals with poor financial health reporting concerns about losing the value of their savings due to inflation. With these concerns in mind, it’s not surprising to learn that by Q3, 56% of small businesses reported that they found it challenging to keep up with employees’ salary expectations and demands – a sentiment that was echoed in the Q4 index as well.
Q4 data also showed that small businesses see a weakening economy at both the macro and micro level. Only 30% of small businesses say their local economy is in good health, and that number declines to 25% for the U.S. national economy, which could by why small business owners are wary of what’s to come. Indeed, at the end of 2023, small business owner confidence remained cautious, as indicated by a Small Business Index score of 61.3 out of 100.
Supporting Your Workforce
Small business leaders and hiring managers can stand out by taking the time to understand and make changes based on the external factors that are impacting their employees’ needs.
To start, employers need to take inventory of their employees’ financial concerns; for instance, 81% of small employers say their workforce is financially healthy, while only 53% of small business employees report good financial health. Let us also consider that financial health among small business employees has plunged 10% year-over-year. This is 1.5 times the rate experienced by employees at larger organizations. Gaps like these underscore that many small business employers are overestimating their employees’ financial wellness and highlights the need to adjust.
Particularly as the cost of turnover ranges from one-half to two times an employee’s annual salary, investment into voluntary workplace benefits can go a long way for employee financial wellness and employer budgets. Additional costs and staffing concerns are the last thing any small business leader needs – and so, by providing resources that support the financial health of your workforce, you can position your business to retain workers for the long term.
The Road Ahead
At the same time that small business leaders reported more pessimistic-leaning views regarding the national and local economy, data from the Q4 index suggests that small businesses are still hopeful about the future of their businesses. Consider these key indicators:
- 65% of small business expect revenue to increase in 2024
- 64% of small businesses say the overall health of their business is somewhat or very good
- 42% of small businesses say they plan to increase investment in the next year
- 40% of small businesses report that they plan to increase staff in the next year
That said, it’s clear that attracting and retaining talent will continue to be a challenge for small businesses this year, particularly as close to half of employers who looked for new talent last year said it is hard to offer competitive pay and benefits. Due to this, many small businesses are considering new ways to provide a competitive edge, with solutions ranging from flexible work schedules, hybrid or remote work options, and paid sick leave.
Final Thoughts
2023 presented a unique economic landscape, leaving employers tasked with supporting employee financial wellness, while they worked simultaneously to overcome trials and tribulations facing their businesses. With ever-rising employee expectations, maintaining and retaining talent has been and will continue to be a priority, ultimately pushing small businesses to consider different ways to keep current workers satisfied and prospective talent interested. Against this backdrop, what changes is your organization making to keep pace with employee demands?
By Cynthia Smith
As Senior Vice President of Regional Business at MetLife, Cynthia Smith plays a leading role in helping small businesses find the right mix of benefits to help attract and retain top talent.
This article, “Small Business in 2023 and 2024: Where We’ve Been, What’s to Come, and How Employers Can Prepare” was first published on Small Business Trends