Economic Confidence Among Small to Mid-Sized Businesses Remains High, but Cracks Begin to Show

Rhea-AI Summary

The CBIZ Main Street Index - Summer 2024 reveals high economic confidence among small and mid-sized businesses (SMBs), with the Business Confidence Study's weighted average rising to 69.7. However, challenges persist:

1. Labor shortages: 62.4% cite skilled worker shortages as their top concern, up 16% from January.

2. Pricing pressures: Only 3.2% plan price increases of 10% or more, down from 9.7% in January.

3. Margin squeeze: 44.9% are enhancing compensation/benefits to address workforce issues.

SMBs are adapting by increasing sales efforts (52.8%), implementing workforce optimization (49.5%), and leveraging technology, including AI (42.4%). The survey, conducted May 13 - June 19, analyzed responses from 549 businesses with fewer than 100 employees across 31 industries.

Positive

• Business Confidence Study weighted average rose to 69.7, up 9 points from last summer
• 52.8% of SMBs have increased or plan to increase their sales efforts
• 49.5% of businesses are implementing workforce optimization strategies
• 42.4% of businesses are leveraging AI to improve efficiency

Negative

• 62.4% of SMBs cite skilled worker shortages as their top concern, up 16% from January 2024
• Only 3.2% of businesses plan price increases of 10% or more, down from 9.7% in January 2024, indicating reduced pricing power
• 44.9% of SMBs are enhancing compensation/benefits packages, potentially squeezing profit margins
• 40.3% of businesses are worried about affording healthcare coverage costs
• 81% of SMBs do not have an AI risk management program in place

Insights

Financial Analyst

The CBIZ Main Street Index highlights several trends that could have significant implications for the financial health of small to mid-sized businesses (SMBs). The increase in business confidence, as reflected by a nine-point rise in the weighted average confidence score, is encouraging. However, it's important to note that the ongoing need to enhance compensation and benefits to attract skilled workers will likely continue to squeeze margins. With over 52.8% of businesses increasing their sales efforts, there appears to be a strong focus on revenue growth to counteract these margin pressures.

This proactive approach to increasing sales could be seen as a defensive measure against anticipated economic downturns. Additionally, the reduction in planned price increases suggests that businesses may be facing pricing power limitations, potentially due to competitive pressures or customer price sensitivity. While steady interest rates and a robust stock market have provided some stability, the underlying financial challenges remain significant. SMBs are clearly preparing for a more volatile economic environment, which could impact their short-term profitability but might set a stronger foundation for long-term resilience.

Market Research Analyst

The CBIZ Main Street Index unveils critical insights into the current sentiments and strategic responses of SMBs across various industries. The fact that 39% of businesses are leveraging technology to improve efficiency, particularly AI for tasks like drafting emails and data analysis, indicates a broader trend towards digital transformation. However, the lack of AI risk management programs in 81% of businesses reveals a significant gap in understanding and mitigating AI-related risks. This could pose future challenges as businesses become more dependent on technology without adequately managing its risks.

Furthermore, concerns around healthcare costs (40.3%) and economic factors such as interest rates (35.5%) highlight persistent cost pressures that could affect business sustainability. The focus on workforce optimization and cost-cutting measures, including exploring outsourcing and optimizing fixed costs, suggests that businesses are bracing for potential economic headwinds. This strategic shift towards efficiency and cost management is likely a response to the multifaceted challenges they face, including labor shortages and competitive pressures.

Tech Expert

The CBIZ Main Street Index data shows a significant reliance on technology, with over 39% of businesses using AI to tackle workforce challenges. The adoption of AI for routine tasks like drafting emails and data analysis underscores a shift towards operational efficiency and automation. However, the absence of AI risk management programs in 81% of businesses is concerning. This lack of preparedness could lead to potential risks, including data breaches, compliance issues and ethical concerns related to AI use.

The focus on technology to drive efficiency reflects a broader industry trend towards digital transformation, but without the necessary risk management infrastructure, businesses might expose themselves to unforeseen vulnerabilities. This highlights an urgent need for SMBs to not only adopt advanced technologies but also to implement comprehensive risk management frameworks to safeguard their operations.

The CBIZ Main Street Index — Summer 2024 reveals the need for skilled workers, a lack of pricing power and marginal pressures as key challenges for SMBs

CLEVELAND--(BUSINESS WIRE)-- CBIZ, Inc. (NYSE: CBZ), a leading provider of financial, insurance and advisory services, has released the CBIZ Main Street Index — Summer 2024, taking the pulse of and gauging the outlook for small and mid-sized businesses (SMBs). While the Index found a notable sense of confidence for SMBs, labor challenges remain the top concern. About two-thirds (62.4%) say having an adequate number of skilled workers is their biggest concern, up 16% from January 2024. To address workforce issues, nearly half of respondents (44.9%) are enhancing compensation and/or health and benefits packages.

The Index’s Business Confidence Study saw its weighted average rise to 69.7, up nine points from last summer. But while confidence levels among SMBs remain high, the Index found that these businesses are still making adjustments in preparation for a downturn in the economy, with over half (52.8%) of respondents having increased or planning to increase their sales efforts. As businesses enhance their focus on driving volume, the Index also found that price increases of 10% or more are down compared to January 2024. Only 3.2% have increased or plan to increase prices by 10% in summer 2024, compared to 9.7% in January 2024.

“The stabilization of interest rates and a strong stock market are contributing to the elevated business confidence,” said Anna Rathbun, Chief Investment Officer of CBIZ Investment Advisory Services. “Steady rates allow business owners to plan more effectively without the disruption of continual rate hikes, and a robust stock market tends to bolster the confidence of business owners who have investments or brokerage accounts. Despite this optimism, there are signs of underlying stress. Businesses are increasingly finding that they lack the pricing power they once had, leading them to push for higher sales volumes to compensate. Additionally, the ongoing challenge of attracting and retaining skilled workers is forcing many to enhance compensation and benefits, further squeezing margins. These factors suggest that while confidence remains strong at the surface, there are significant pressures building beneath.”

Based on a survey conducted from May 13 - June 19, the Index analyzed responses from 549 businesses with fewer than 100 employees in 31 industries across the U.S.* The Index assesses a range of timely trends, including business sentiment, areas of growth and decline, and cash flow.

The data was evaluated from an overall perspective, as well as based on company size, region and industry. An interactive infographic with the results is available on the CBIZ website. Additional key findings include:

• Healthcare costs and economic factors remain top-of-mind concerns: The Summer 2024 CBIZ Main Street Index reveals that 40.3% of small to mid-sized businesses are worried about affording healthcare coverage costs, marking it as the second highest. Additionally, 35.5% of businesses are concerned about interest rates, while 34.5% are worried about cybersecurity threats. With the upcoming election, 29.1% of SMBs are also uneasy about potential tax policy changes.
• SMBs focusing on workforce optimization amid economic uncertainty: Nearly half of businesses (49.5%) have implemented or plan to implement workforce optimization strategies, including evaluating and adjusting current staffing levels and exploring outsourcing options. Additionally, 48.8% of businesses are reviewing and optimizing fixed costs, such as insurance coverages, to better prepare for potential economic downturns.
• Turning to technology to tackle workforce challenges: More than 39% of businesses are focusing on improving efficiency with technology to address workforce issues. This includes the use of AI, which 42.4% of businesses are leveraging, to save time drafting emails and other documents. Additionally, 34.1% are utilizing AI for data analysis and insights. However, 81% of SMBs do not have an AI risk management program in place to understand and manage AI-related risks.

*Note: Not all those surveyed in the CBIZ Main Street Index are clients of CBIZ.

About CBIZ

CBIZ is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 120 offices in 33 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit www.cbiz.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724499638/en/

Media

Alex Ortiz

Gregory FCA for CBIZ, Inc.

Cbiz@gregoryfca.com

610-228-2119

Source: CBIZ, Inc.

FAQ

What is the current business confidence level for SMBs according to the CBIZ Main Street Index - Summer 2024?

The Business Confidence Study in the CBIZ Main Street Index - Summer 2024 shows a weighted average of 69.7, up 9 points from last summer, indicating high economic confidence among small and mid-sized businesses.

What percentage of SMBs are concerned about skilled worker shortages in the Summer 2024 CBIZ Main Street Index?

According to the Summer 2024 CBIZ Main Street Index, 62.4% of small and mid-sized businesses cite having an adequate number of skilled workers as their biggest concern, up 16% from January 2024.

How are SMBs addressing workforce issues according to the CBIZ Main Street Index - Summer 2024?

The CBIZ Main Street Index - Summer 2024 shows that 44.9% of SMBs are enhancing compensation and/or health and benefits packages to address workforce issues. Additionally, 39% are focusing on improving efficiency with technology, including AI adoption.

What percentage of SMBs are planning to increase prices by 10% or more according to the CBIZ Main Street Index - Summer 2024?

The CBIZ Main Street Index - Summer 2024 reports that only 3.2% of SMBs have increased or plan to increase prices by 10% or more, down from 9.7% in January 2024, indicating reduced pricing power.

How many businesses were surveyed for the CBIZ Main Street Index - Summer 2024?

The CBIZ Main Street Index - Summer 2024 analyzed responses from 549 businesses with fewer than 100 employees across 31 industries in the United States.