Koble’s 2019 SMB Sales and Growth Confidence Survey

A year has passed since our first annual Koble SMB Sales and Growth Confidence Survey. A lot has changed for small- to medium-sized businesses over the last 365 days. The Trump administration’s new tax reform officially went into effect, the employment rate continues to tick higher, the longest government shutdown in history came and went, […]

Jackie
18/04/2019

A year has passed since our first annual Koble SMB Sales and Growth Confidence Survey.

A lot has changed for small- to medium-sized businesses over the last 365 days. The Trump administration’s new tax reform officially went into effect, the employment rate continues to tick higher, the longest government shutdown in history came and went, and whispers of an oncoming recession have started to blow in the wind.

With more than 11 million American SMBs on our business-to-business discovery platform, Koble has a unique pulse of how both micro and macro events in the U.S. and globally are impacting businesses on Main Street each day. To take a deep-dive into how these events are affecting sales, business strategies and SMB growth optimism for 2019, we commissioned the second iteration of our SMB Sales and Growth Confidence Survey at the end of Q1 2019.

This analysis was conducted via an online survey of 500 owners and operators of small- to medium-sized businesses throughout the United States with fewer than 100 employees. Some of the same questions we asked in 2018 were asked again to compare year-over-year benchmarks, while a new series of questions investigated how SMBs are dealing with growing uncertainty on government actions and how it could impact their business.

Here’s what we learned from Koble’s 2019 SMB Sales and Growth Confidence Survey:

Finding New Customers Remains #1 SMB Challenge, While Changes in Government Regulations is a Rising Concern

Finding new customers continues to be SMBs’ most significant challenge for building their business this year, although it dropped slightly with 36% of SMB owners noting it would be their top challenge in 2019 versus the 46% that indicated it would be their top challenge in 2018.

Meanwhile, despite headlines on how the Trump administration’s deregulations are helping SMBs to thrive, the number of SMB owners noting that new or changing government regulations (outside of tax reform) are causing a challenge increased from last year.

In 2018, only 7% of SMB owners said they anticipated new or changing government regulations would be a challenge to growing their business during the calendar year. In 2019, that number has risen to 15%, making it SMBs third biggest challenge with growing their business. Meanwhile, the challenge of hiring new employees has increased slightly in 2019 to 17% from 16%  to become SMBs second most significant challenge with growing their business this year.

With the unemployment rate continuing to drop over the last year, it has become increasingly difficult for SMBs to find quality talent as they compete with bigger businesses that have more flexibility with compensation and benefits packages. Conversely, the number of SMB owners saying that limited access to capital would be their biggest challenge with growing their company this year slid from 16% in 2018 to 14% in 2019, going from SMBs second biggest challenge with growth to their fourth biggest.

While SMBs across all industries said finding new customers their biggest challenge, those within the retail/food (19%) and real estate/construction industries (20%) were the most likely to say hiring new employees was a top challenge.

Email & Social Media Marketing Tops SMB Plans to Create New Customers

How do SMBs plan to solve their number one challenge of finding new customers in 2019?

Email and social media marketing (26%) topped their list, followed by online advertising (18%) and networking events or conferences (17%). Networking online (11%) and content marketing/PR (9%) rounded out the top five ways they plan to build out sales pipelines.

SMB owners running food or retail businesses were the most likely to say they are relying on email and social media marketing to create sales leads (34%). These food and retail business owners were also the most likely to say they would be relying on online advertising (25%).

SMB owners running business service firms, on the other hand, were the most likely to say they would be relying on networking events or conferences (33%) to create sales leads. Meanwhile, SMB owners of software engineering/design firms were the most likely (14%) to say they would be relying on networking online.

Overall, younger business owners were the most likely to indicate they would be using digital tools over analog ones to drive new business in 2019. For instance, millennial SMB owners were most likely to say they were planning to create sales leads with online advertising in 2019.

As SMBs File First Taxes Under Tax Reform, 42% Seeing No Impact

 

When we asked SMBs last year if tax reform would have a positive or negative impact on their business during the year, most SMB owners (43%) said it would have no impact. The responses seemed to make sense given SMBs were filing taxes for 2017 around that time and tax reform only came into play for the 2018 calendar year.

Still, without much visibility into how it was impacting their business at the time, the majority of business owners weren’t changing course with running their business in 2018 with any anticipated changes.

A year later when we asked SMBs the same question as they filed taxes for the 2018 season, most SMB owners (42%) still say tax reform will have no impact on their SMB in 2019. Those that think tax reform will harm their business has dropped slightly from 26% in 2018 to 23% in 2019, and those that think it will have a positive impact on their business this year has risen slightly from 31% to 35%.

Despite tax reform appearing to have little impact on SMBs across numerous industries, there are SMB owners within a few specific sectors that say reform is having a positive effect on their SMB this year.

Namely, 57% of SMB owners in the HR/staffing industry noted tax reform will have a positive impact on their business this year, and 40% of SMB owners in the real estate/construction industry indicated the tax changes would have a positive impact on their business as well.

Government Shutdown Didn’t Alter SMBs’ Confidence in Sales Prospects

The U.S. had a 34-day government shutdown this past December through January, the longest in its history. How did it impact SMBs? Although the majority (54%) of SMB owners said that shutdown and possible future shutdowns do not change their confidence level in their business prospects this year, there was around a quarter of SMB owners (24%) who said they were less confident in their business prospects after dealing with the government shutdown.

Interestingly enough, nearly the same amount (22%), said they were more confident in their business prospects after seemingly going through the first shut down with noticing little impact with their sales pipelines.

Women SMB owners are less confident (29%) than their male counterparts (20%) in their sales prospects after the shutdown. Meanwhile, Baby Boomer (28%) and Millennial (26%) SMB owners were the most likely to say they were less confident in their sales prospects after the 34-day government hiatus.

When looking at different industries, SMBs in HR/staffing (36%) and software engineering (28%) were the most likely to say they were more confident in their sales prospects following the government shutdown.  

Limiting New Hires is One of Few Actions SMBs are Planning Against Uncertain Government Actions

With regulation changes, tax reform and the government shutdown only slightly impacting the majority of SMBs it wasn’t shocking that the vast majority of SMB owners (69%) said they weren’t planning any course corrections in the face of uncertain government action throughout the calendar year.

The only action that more than 10% of SMB owners said they were planning if government actions caused business challenges was limiting new hires (11%). The other nearly 20% of SMB owners that said they were planning some type of action, were almost equally split between trimming perks and other employee benefits (5%), cutting back on holidays given (5%), removing bonuses (5%) and freezing salaries (4%).

Women SMB owners (75%) were even more likely than men (66%) to say they were planning no action. Meanwhile, Millennial SMB owners (19%) were the most likely to say they were intending to limit new hires in the face of business challenges resulting from uncertain government action.

Across different industries, SMB owners in the real estate/construction vertical were the most likely say they were planning no action (77%), while SMB owners in the software engineering/design industry were the most likely to stay they were planning to limit new hires (15%).

Nearly 1/ 4 of SMB Owners Say They’re Seeing Early Signs of a Recession

Are you seeing any indicators with your business that you believe may be early signs of an economic recession to come?

 

While government headwinds may not be slowing down SMBs much in 2019, they may soon face a stronger macroeconomic headwind. Nearly a quarter of SMB owners (24%) say they see indicators with their business that they believe may be early signs of an economic recession to come. That number was even higher for SMBs run by Millennials (26%).

That said, the majority of SMB owners (54%) noted they don’t see any indicators with their business that they think would signal a recession to come. Also, 22% of SMBs said they’re not sure if they see signs.

Looking across different industries, SMB owners in the farming/agriculture (46%) and health/wellness (42%) sectors were the most likely say they see early indicators of a recession.

Comparatively, those in the real estate/construction (19%) and business services (22%) were the least likely to say they saw early signs of a recession.

Investment in Operations/Infrastructure Slips; Slight Increases in Investment in Marketing, Hiring and  Salaries

In terms of how SMBs will be reinvesting their sales profits in their business this year, the answers were fairly in-line with answers to the same question when asked in 2018.

However, planned investment in operations/infrastructure dropped from 28% to 23%, leaving that planned investment tied for number one with investment pegged for marketing/sales (23%). That slotted investment for marketing/sales was a 1% increase from 2018. Paying employees more (14%) and hiring more employees (13%) also both saw 1% increases from last year.

Not very surprising given it is an infrastructure-heavy industry, SMB operators in the farming/agriculture industry are continuing to invest in operations and infrastructure this year with their profits (49%). Meanwhile, SMB owners in HR/staffing were the most likely to say (34%) they’ll be using the profits to pay employees more this year.

Meanwhile, SMB owners of software engineering/design firms were the most likely to say (31%) that they plan to reinvest their money back into marketing/sales. Similarly, Millennial SMB owners, many of which operate within the software/engineering industry, were much more likely (35%) than owners from other generations to say they will be investing in marketing/sales.

SMBs run by men were more likely to say they will be investing profits in operations and infrastructure as their first choice (24%), while SMBs run by women were more likely to say they will be investing in marketing/sales (25%) as their first choice of profit reinvestment.