In Unsettled Economy, Small and Mid-Sized Businesses Struggle with Staffing as Inflation Pressures and Rising Health Care Costs Persist

Rhea-AI Summary

The CBIZ Fall 2024 Main Street Index reveals small and mid-sized businesses (SMBs) are facing significant challenges in the current economic climate. Key findings include:

- 51% of SMBs are evaluating or changing staff levels due to economic concerns
- 62% report full staff utilization, down 7% from June
- 19% experienced significant increases in costs of goods and services
- 18% saw sharp rises in labor costs
- 53% have increased prices, with 28% raising them by 5% or more
- 58% are concerned about health care benefit costs, up 13% from summer
- 83% utilize AI tools, with 80% considering AI important for competitiveness

The survey, conducted from September 16 to October 11, analyzed responses from 401 businesses with fewer than 100 employees across 31 industries in the U.S.

Positive

• 83% of SMBs report utilizing artificial intelligence tools in their businesses
• 80% of businesses surveyed consider AI at least slightly important for staying competitive
• 49% of SMBs are prioritizing increased sales efforts

Negative

• 51% of SMBs are evaluating or changing current staff levels due to economic concerns
• 62% of businesses report full staff utilization, down 7% from June
• 19% of SMBs experienced significant increases in costs of goods and services
• 18% of SMBs saw sharp rises in labor costs
• 53% of SMBs have increased prices, with 28% raising them by 5% or more
• 58% of SMBs are concerned about the cost of health care benefits, up 13% from the previous survey

Insights

Financial Analyst

The CBIZ Main Street Index for Fall 2024 reveals significant challenges for small and mid-sized businesses (SMBs) in the current economic climate. Key findings include:

• 51% of SMBs are reevaluating staff levels due to economic concerns
• Only 62% of businesses can fully utilize their staff, down 7% from June
• 19% report significant increases in costs of goods and services
• 53% have increased prices, with 28% raising them by 5% or more

These trends indicate persistent inflationary pressures and potential workforce reductions, which could impact CBIZ's client base and service demand. The focus on cost management and AI adoption (83% of SMBs using AI tools) suggests opportunities for CBIZ to offer targeted advisory services. However, the overall economic uncertainty and potential downturn could pose risks to CBIZ's revenue growth in the near term.

Market Research Analyst

The CBIZ Main Street Index provides valuable insights into SMB sentiment and challenges. Notable trends include:

• Rising concern over healthcare costs (58%, up 13% from summer)
• Focus on sales efforts (49%) and workforce utilization (52%)
• Emphasis on tax reform (58%) and healthcare policy (49%) as legislative priorities

These findings highlight opportunities for CBIZ to tailor its services to address client pain points, particularly in healthcare cost management and tax advisory. The widespread adoption of AI (83%) among SMBs also presents a chance for CBIZ to enhance its tech-driven solutions. However, the looming economic uncertainty and potential staffing changes among clients could impact demand for certain services, requiring CBIZ to adapt its offerings and market approach accordingly.

The CBIZ Main Street Index – Fall 2024 finds the majority of SMBs are evaluating staff levels, with many unable to fully utilize their workforce amid the looming presidential election

CLEVELAND--(BUSINESS WIRE)--

CBIZ, Inc. (NYSE: CBZ), a leading provider of financial, insurance and advisory services, has released the Fall 2024 Main Street Index, taking the pulse of and gauging the outlook for small and mid-sized businesses (SMBs). The index revealed that companies are facing growing staffing challenges, as rising business costs and economic conditions are prompting potential layoffs. Fifty-one percent of SMB owners surveyed say they are evaluating or changing current staff levels and outsourced partners to prepare for a potential economic downturn. Additionally, 62% of businesses report they are able to utilize their staff to its full capacity, down 7% from June.

“We are at an inflection point in the economy, where uncertainty is high, and labor data trends are inconsistent. Many businesses, especially SMBs, are reevaluating their staffing and operational strategies in response to rising costs and economic shifts,” says Anna Rathbun, Chief Investment Officer at CBIZ Investment Advisory Services. “The Federal Reserve has embarked on a cutting cycle, but the impact of monetary policy comes with a lag. We are seeing significant impacts of the sustained restrictive policy across rate-sensitive sectors, sluggish M&A activity and dearth of IPOs. Slower financial activity may have broader implications for Main Street, including workforce utilization and the potential for tougher times ahead.”

While the rate of month-over-month inflation has fallen close to the Federal Reserve’s benchmark of 2%, SMBs continue to feel lagging cost pressures. Nearly one in five (19%) have experienced a significant increase in the cost of goods and services, with almost all other companies surveyed seeing a modest increase. Additionally, more than 18% have seen a sharp rise in labor costs. Much of these added expenses continue to be passed down to the customer, as 53% have increased their prices over the past few months. While most have added 1% to 4% on their price tags, more than 28% have raised costs by 5% or more.

Rathbun adds: “There are signs in our data suggesting inflation is being baked into the major economic indicators, including employment cost. Many SMBs want to hire more workers, but there is a shortage of skilled professionals that keeps the cost of labor high. Fifty-six percent of respondents in our survey noted the ability to hire skilled labor as a top concern. In addition, the cost of fringe benefits, such as health insurance, has also surged, increasing business overhead. Add the uncertainty around tax policy in an election year, small and mid-sized business owners are very much in wait-and-see mode right now.”

Based on a survey conducted from September 16 through October 11, the Index analyzed responses from 401 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:

• Adjustments amid a possible economic downturn: Almost as many businesses report prioritizing increased sales efforts (49%) as those prioritizing full utilization of its workforce (52%). Forty-nine percent of SMBs also want to review and get the most out of fixed costs, like insurance coverage.
• Top concerns in this economy: The Fall survey saw a sharp rise in the number of SMBs worried about the cost of health care benefits (58%), up nearly 13% from the Summer Main Street Index. Results show the top way organizations want to address workforce issues is to enhance salary or health care benefits packages, highlighting the ongoing conundrum many businesses face with their budgets. Additionally, nearly 46% of companies are concerned about pending regulatory or legislative changes as a new Congress takes shape in 2025.
• Where lawmakers should focus on policy making: With eyes on Washington this presidential election season, a majority of businesses (58%) feel lawmakers should address tax reform and incentives. Nearly 49% of companies feel health care policy should be a priority, while 42% want the regulatory environment to be simplified.
• SMBs views on the use of artificial intelligence tools: Eighty-three percent of respondents reported utilizing artificial intelligence in their businesses. More than one in four SMBs use AI to draft emails and communications, freeing up time for other tasks, while 20% use it for data insights and analysis. Additionally, 80% of businesses surveyed consider AI at least slightly important for staying competitive, with 18% rating it as very or extremely important.

*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/20241022240375/en/

Rocco Aloe

Gregory FCA for CBIZ, Inc.

Cbiz@gregoryfca.com

Source: CBIZ, Inc.

FAQ

What percentage of SMBs are evaluating staff levels according to the CBIZ Fall 2024 Main Street Index?

According to the CBIZ Fall 2024 Main Street Index, 51% of small and mid-sized businesses (SMBs) are evaluating or changing current staff levels and outsourced partners to prepare for a potential economic downturn.

How many SMBs have increased prices in the past few months as per the CBIZ survey?

The CBIZ survey reveals that 53% of small and mid-sized businesses have increased their prices over the past few months, with more than 28% raising costs by 5% or more.

What percentage of SMBs are using artificial intelligence tools according to the CBIZ Fall 2024 Main Street Index?

The CBIZ Fall 2024 Main Street Index reports that 83% of small and mid-sized businesses surveyed are utilizing artificial intelligence tools in their operations.

How many SMBs consider AI important for staying competitive based on the CBIZ survey?

According to the CBIZ survey, 80% of small and mid-sized businesses consider AI at least slightly important for staying competitive, with 18% rating it as very or extremely important.