By Nich Tremper.
In the 2024 State of Small Business survey, Gusto seeks to understand how small businesses are starting to use this still very new technology. While 43% of small businesses have never considered using GenAI in their businesses, nearly one-third of businesses have experimented with GenAI and one-fourth of small businesses say they are already benefiting from incorporating GenAI into their businesses.
In just two years generative artificial intelligence has become commonplace in business and personal use alike. Generative artificial intelligence, or GenAI, takes prompts, input, and data from a user and is capable of using that data, in addition to a vast amount of training data, to create new content. If used well, GenAI has the ability to increase human productivity, efficiency, and creativity.
In this report, we seek to learn from the gains made by small businesses that have adopted or enthusiastically adopted GenAI into their work and compare these outcomes with businesses that have never considered GenAI and those who are only experimenting with GenAI. We call these groups AI users and non-AI users, respectively.
Key findings
- Businesses that used GenAI had an easier time hiring. Among businesses that tried to hire, those that use GenAI were 45% more likely to report that they could fill open roles than businesses that did not use GenAI. Companies using generative AI experience fewer difficulties in hiring compared to those that do not. Specifically, businesses in the community and personal services sectors see substantial benefits.
- Employees at businesses that use Generative AI are much more likely to exceed expectations. GenAI helps reduce workloads, particularly for repetitive tasks, allowing employees to focus on more impactful business-building activities. That may be why businesses that use Generative AI report that their employees are significantly more likely to exceed expectations compared to those that do not use AI.
- Millennial and Gen Z business owners are 56% more likely to use Generative AI than Gen X business owners and 76% more likely than Baby Boomer owners: Millennial and Gen Z business owners are more likely to utilize generative AI in their operations than older generations, such as Gen X and Baby Boomers. This trend reflects their comfort with rapidly changing technologies, highlighting a generational shift in how businesses incorporate AI.
1-in-4 businesses have adopted Generative AI into their business practices
Our research shows that half of U.S. small businesses are incorporating GenAI into their business practices. While only 1 in 10 is “enthusiastically using it as a tool for business”, we are seeing an increasing amount of small businesses using it more regularly and experimenting with it. GenAI is widely known to provide an array of benefits, from operational efficiency and cost savings to better customer engagement and innovation. It can automate repetitive tasks, such as data entry, content generation, customer support, and report creation, saving businesses both time and labor costs.
Businesses that adopt generative AI appear to do so across various functions, freeing employees from tasks they may not be well-qualified for or interested in, ultimately enhancing overall performance.
Generative AI is different from older technologies because it can take inputs to create new content and analysis. Businesses that use generative AI tend to take advantage of the technology by incorporating it into most of their operations. These include things like planning for the future (33%), purchasing expert-created GenAI to accomplish tasks (30%), and performing business (49%) or legal (35%) research. In much the same way that Internet search made information available to businesses from their personal computers, GenAI provides businesses with information and helps them synthesize it to apply to their own goals and business development. GenAI adopters have learned how to best complement the skills and knowledge of their human employees, and benefit from doing so through employees that perform better for the business.
Businesses that used GenAI had an easier time hiring
One-third of businesses that do not use GenAI in their business reported having difficulty hiring this year, compared to only 18% of businesses that use the technology. While Generative Artificial Intelligence can provide efficiency enhancements in many business operations, it is best suited for repetitive and manual tasks. Both employees and employers are happy to offload tasks in which GenAI excel to provide employees with the time and capacity to grow the business.
Nearly two-thirds of businesses said that they hired employees to do crucial tasks necessary for building a business, things like landing sales, serving customers, and leading the company. Small businesses provide opportunities for employees to grow beyond their skill set, and small business employees look for opportunities to make an impact. Using GenAI to automate some tasks allows business owners the ability to offer meaningful and high-impact work. This increases the likelihood of finding employees that are eager to help grow their businesses.
Businesses in the community and personal services industries experience significant hiring benefits by using GenAI
GenAI technology is often thought to be a tool that is most prevalent in white collar jobs associated with the professional services sector, yet businesses in this sector that do and do not use GenAI reported similar levels of difficulty hiring this year. However, businesses that use GenAI in the community services and personal services sectors report significantly less difficulty hiring than businesses in these sectors that do not use GenAI.
The community services sector includes non-profit organizations as well as health care and educational services, among other industries. The personal services industry includes businesses in the arts, entertainment, and accommodation industries. Jobs in both of these sectors may be particularly sensitive to the benefits of GenAI, because the technology is currently best equipped to handle routine and administrative tasks that do not interest employees in these industries. For example, a local theater may employ creatives to run their programming, but a necessary component of that is creating a schedule for the theater’s season. GenAI can free employees to focus on the type of programming they want to include rather than the administrative work of filling out a calendar.
While performing tasks that differ from human expertise in the community and personal services industries, GenAI is used to complement human positions in many professional services industries. These workers have had the most exposure to GenAI since its introduction. Employees seeking jobs in these industries are likely to assume that businesses have integrated GenAI into some of their business operations, and our findings suggest that this is broadly correct.
A third of small businesses in the professional services sector use GenAI while only one-fifth of businesses in each of the the community and personal services sectors do.
Businesses that use generative artificial intelligence are 44% more likely to say that their employees exceed their expectations
Not only do businesses that use GenAI have an easier time hiring employees, but they are also 42% more likely than non-AI users to say that their employees exceed their expectations. Generative AI often reduces employees’ workloads, particularly for repetitive tasks, allowing them to focus on business-building activities that they were hired to perform. By automating necessary, but maybe not business critical tasks, generative AI enables employees to excel in areas that directly impact business growth.
Millennial and Gen Z business owners are most likely to use AI in their business
Nearly one-third of Millennial and Gen Z business owners use generative AI in their businesses, compared to around one-fifth of businesses owned by Gen X and Baby Boomers. Both the Millennial and Gen Z and generations are trademarked by their exposure to quickly-changing technologies throughout most of their lives. Millennial entrepreneurs were raised with near universal access to the Internet, while Gen Z entrepreneurs were raised with near universal access to smartphones. These entrepreneurs are comfortable and fluent with incorporating new technologies, so it’s unsurprising that they are the most likely to have already implemented generative artificial intelligence. Simultaneously, there is no difference between male and female business owners on using generative artificial intelligence.
Conclusion
The adoption of Generative AI offers significant advantages for businesses, particularly in hiring and employee performance. Companies using GenAI experience fewer challenges in recruitment, with employees more likely to exceed expectations by focusing on higher-impact tasks. While younger business owners are leading the charge in AI adoption, businesses across various sectors—including community and personal services—are seeing tangible benefits. As GenAI continues to evolve, its ability to enhance efficiency and drive growth will likely become an essential tool for small businesses striving to stay competitive.
Methodology
Data presented here are from a survey of over 1,300 respondents conducted by Gusto between August 6 and August 31, 2024. Survey participants were recruited from the universe of Gusto customers who have owned their business since at least July 31, 2023. Survey results were weighted using the national distribution of 2-digit NAICS sector and firm age from the 2022 Annual Business Survey.
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Nich Tremper is an Economist at Gusto, researching entrepreneurship and the small business life cycle in the modern economy. Nich has worked in research offices in the federal government and financial service industries, studying small business outcomes and their roles in local economies. He holds a Master’s degree from the University of Minnesota, where he researched local government business expansion efforts. Nich currently lives in Winston-Salem, NC.
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