The need for skilled workers, a lack of pricing power, and marginal pressures are the biggest challenges right now for small and midsized business owners, according to the Summer 2024 Main Street Index from top 15 accounting firm CBIZ.
While the index found a notable sense of confidence among SMB owners, labor challenges remain their top concern. About two-thirds (62.4%) say having an adequate number of skilled workers is their biggest concern, up 16% from January 2024, as well as increases in employee turnover or resignation (45.8%).
The good news, according to CBIZ, is that workforce utilization is at its highest point in a year, and layoffs and hiring freezes have decreased by 2.6% and 5.2%, respectively.
To address workforce issues, nearly half of respondents (44.9%) indicated they are enhancing compensation and/or health and benefits packages.
The Main Street 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 more than half (52.8%) of respondents having increased or planning to increase their sales efforts.
As businesses enhance their focus on driving volume, the Main Street 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.
“The stabilization of interest rates and a strong stock market are contributing to the elevated business confidence,” Anna Rathbun, chief investment officer of CBIZ Investment Advisory Services, said in a statement. “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,” she added. “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.”
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 SMB owners are worried about affording healthcare coverage costs, making it their second-highest concern. Additionally, 35.5% of business owners are concerned about interest rates, while 34.5% are worried about cybersecurity threats. With the upcoming election, 29.1% of SMB owners are also uneasy about potential tax policy changes.
- SMBs focusing on workforce optimization amid economic uncertainty: Nearly half of respondents (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 SMB owners 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 business owners 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.
Based on a survey conducted from May 13 until June 19, the CBIZ Summer 2024 Main Street 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, according to CBIZ.
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