THE EVOLVING SMB LANDSCAPE

BY Carson King

Vice President
Simploy

November 2023

 

Since the beginning of the PEO industry, PEOs have always played essential roles in supporting small and medium sized businesses. The challenges and evolution faced by these businesses, combined with the ever-growing importance of employee well-being, provide a holistic landscape where PEOs can refine their service offerings so as to cater to emerging demands.

SMBS: THE HEARTBEAT OF THE U.S. ECONOMY

Small businesses may carry the prefix “small”, but their influence on the American economy is anything but small. Representing 99.9% of all U.S. firms, these 33.2 million entities are synonymous with innovation, resilience, and job creation. From 1995 and 2021, SMBs were responsible for creating 63% of all new jobs in the U.S. economy and currently account for almost half of America’s private sector workforce. SMBs’ contribution of 43.5% to the U.S. GDP is a clear indication of the SMB economic behemoth that lays at the foundation of the U.S. economy. This economic dynamism offers PEOs a unique opportunity to tailor services, ensuring that they provide the requisite tools and support these businesses need to thrive.

EMPLOYEE WELLBEING: A CRITICAL DETERMINANT

The evolving landscape of business operations and management signals a significant shift in workplace priorities. While profitability has always been paramount, there is now a more pronounced emphasis on employee mental health and well-being. Seventy-six percent of SMBs now acknowledge mental health as a workplace priority, and even more recognize employee happiness as instrumental to business success. This is a striking divergence from the attitudes of many employers during the last century. However, challenges presented by inflation and dwindling access to capital create profound pressures on employers and business owners.

This is where PEOs shine brightest. Though nascent during the 1980s and 1990s, PEO’s contemporary relevance is huge. PEOs possess a distinctive capacity to align with the shifting sentiments, demands, and economic terrains that SMBs navigate. This adaptability is intrinsic to PEOs, and it underscores why the PEO model has seen such success and resilience. As the business landscape evolves, PEOs will recalibrate their offerings to offer even more solutions that foster a motivated, efficient, and happy workforce.

THE RESURGENCE OF ENTREPRENEURSHIP

One of the more inspiring narratives emerging from recent years, especially since the challenges of the pandemic, is the indomitable spirit of entrepreneurship in the USA. With a record-breaking 5.4 million new business applications in 2021 and 5.1 million in 2022, the country has witnessed a resurgence in entrepreneurial ventures.

Segments like e-commerce, professional services, and consultancies are rising, and these trends present PEOs with an ever-expanding market. By offering specialized services and tools tailored to these emerging sectors, PEOs can further cement their role as indispensable partners to these new-age businesses.

A DEEPER DIVE INTO SMB TRENDS AND THE PROMISE OF PEOS

In a revealing snapshot of the small business environment, the U.S. Chamber of Commerce Small Business Index saw a notable surge in business owner confidence, jumping to 69.2 in Q3 from 63.1 in Q2. This increase represents the highest score since the onset of the pandemic in early 2020. A visible shift in sentiment can be observed, with one-third of these businesses now asserting that the U.S. economy is faring well, marking a 9% increase from Q2. This optimism carries over locally, with 38% expressing positive sentiments about their regional economies, also an increase from Q2’s figures.

However, not all trends are optimistic. Access to capital, the lifeblood of small businesses, remains a constant concern. The Q1 2023 Small Business Index reveals that only 49% of small business owners felt their access to capital or loans was satisfactory. Along with this challenge, there’s an upward trend in working hours for small business proprietors. This uptick sounds alarm bells for potential burnout and a diminishing work-life balance.

Despite these challenges, the health of small businesses themselves is improving; 66% announce their ventures to be in good health – a significant rise from the Q1 figure of 59%. Inflation remains a pressing concern; 52% identifying it as a primary challenge. And while concerns about interest rate hikes have lessened, apprehension surrounding employee salary expectations is growing, with 56% finding it tough to match these demands.

In a testament to the uniqueness of small business operations, 82% agree on the unique position of small businesses in offering employees closer ties and support from top-level management. Prioritizing well-being, 70% of these enterprises are actively addressing mental health initiatives. A significant number of SMBs have begun incorporating resources to bolster employee mental health and well-being, in ways such as mental health breaks and provisions for childcare reimbursements.

Given these challenges and opportunities, PEOs emerge as saviors for SMB owners. With expertise in innovative HR solutions attuned to modern demands, PEOs offer invaluable support. Whether it’s assisting with capital constraints or providing flexible HR and employee benefit strategies, PEOs alleviate pressures, helping to ensure business continuity and sustainability.

THE PEO ROLE

As always, the narrative for PEOs is changing. As the great American economic tapestry undergoes continuous evolution (with SMBs firmly at its core), the significance of the PEO offering has never been more paramount. PEOs are grounded in adaptability and expertise, and they are poised to play an instrumental role in mitigating challenges and bolstering the ever-evolving demands of the SMB sector. The data points towards a resurgence in entrepreneurship, a heightened focus on employee well-being, and the persistent hurdles SMBs face – be it financial or operational. With such a dynamic landscape, PEOs, through tailored services and a deep-rooted understanding of SMB unique needs, are set to solidify their positions as indispensable allies. As SMBs continue to drive America’s economic engine forward, PEOs remain their steadfast co-pilots, ready to navigate through both turbulent skies and clear horizons, helping to ensure a prosperous journey ahead for all.


REFERENCES

  1. “Small Business Index – Summary.” Small Business Index – Q3 2023 Summary, www.uschamber.com/sbindex/summary. Accessed 4 Oct. 2023.
  2. Staff, U.S. Chamber. “The State of Small Business in America.” The State of Small Business in America | U.S. Chamber of Commerce, U.S. Chamber of Commerce, 11 Sept. 2023, www.uschamber.com/small-business/state-of-small-business-now#:~:text=Based%20on%20SBA’s%20definition%2C%20there,99.9%25%20of%20all%20U.S.%20firms.
  3. “Small Business Index – Summary.” Small Business Index – Q3 2023 Summary, www.uschamber.com/sbindex/summary. Accessed 4 Oct. 2023.

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