Small business: new challenges, steady resilience.

The past years have been a reminder that businesses must be prepared for whatever events arise and whatever business conditions follow. That requires disciplined thinking about what could happen, what to do if it does, and how to prepare—and puts a high value on a small business’s ability to anticipate issues and react to them.

Some issues are easier to anticipate, prepare for, and actively track. Inflation is one such issue. Seventy-six percent of businesses are somewhat/very concerned about inflation and its effects.

Ninety percent of businesses have already taken some pricing actions to deal with inflation, like changing purchasing decisions, reevaluating pricing versus the competition, or passing along pricing increases. At the top of the list is accepting lower profitability, which could constrain growth investments or reduce the funds available. Small businesses that add now to cash reserves or adjust spending to anticipate a profitability reduction will reduce the risk that continued inflation can bring.

There are other common issues that small businesses rarely see coming. A key component of having a resilient business is being prepared for the loss of a supplier, employee, or customer and being ready for an economic downturn. Almost 60% of businesses say they’re somewhat/extremely prepared for these events. Simple preparations like having multiple suppliers, cross-training employees and documenting their jobs, and diversifying the customer base can go a long way toward softening the impact.

The hardest to prepare for are the events aren’t visible and the horizon and are unimaginable, like natural disasters—only 51% of small businesses say they’re somewhat/extremely prepared for them. The right insurance coverage is important, as is access to financial resources to provide the flexibility needed to get a business back on its feet. Cash reserves, business credit cards, or business lines of credit can provide the financial resources a small business might need.

Increasing sales efforts tops the list of small businesses’ goals, and 91% of small businesses are planning marketing and sales investments. Small businesses, especially those that are growing fast, have digital marketing investments on their radar, and all their top priorities, including building online/social media presence, improving a website, enhancing ecommerce, or boosting advertising, require funds to make them happen.

The top source for funds is cash on hand or in reserve. The average small business can fund 3.9 months of expenses with cash on hand. Business and personal credit cards are the next place to turn for funding. Small businesses with an operating record, collateral, or equity often then look to bank loans or lines of credit. Equity infusions from owners and investors, SBA loans, equipment/auto financing, and a variety of government-sponsored programs provide additional sources of funding.

Sixty-seven percent of small business owners say their company’s financial well-being is stronger than a year ago—the highest it’s been in five years—and they know they’ll need to take advantage of this opportunity. With the technology investments they’ve planned and supply chain disruptions, labor shortages, and inflation—all of which may require funds to address—small businesses are staying attuned to where they can find the funds they need.

For small businesses looking to grow, studying fast-growing peer companies is a good place to start. By looking at the third of small businesses in our survey that are growing the fastest, owners can see what their fast growth peers are thinking and doing differently and extract ideas that to consider in the growth recipe for their own businesses.

This snapshot of the fastest growing businesses shows how they think and act differently: