Small business: new challenges, steady resilience.

Small business owners are ready for 2022: Our sixth annual survey shows how small business owners are approaching this year.

This year finds small business owners feeling less stressed and with a newfound resilience after surviving the turbulence of the past two years. Check out the results1 of our small business survey to see why.

Small business owners are as confident about their businesses in 2022 as they were before the pandemic. What’s behind that confidence, and what are their plans and worries for the coming year?

The annual Truist survey of small business owners, conducted in February 2022, asked 522 owners (annual revenues between $100,000 and $2 million) about their plans for their businesses and their preparations for 2022.

Key Takeaways

With optimism strong and stress down, owners are displaying confidence in themselves and their businesses. Having made it through the past two turbulent years, businesses are stronger and more resilient than ever and will be ready to face the next set of challenges.

While inflation, supply chain disruption, and labor shortages continue, and owners are concentrating on sales growth, improving processes, and making the technology investments needed to move their businesses toward their goals.

Small businesses take on renewed challenges with renewed optimism

2022 trends

Small business owners’ confidence in their own businesses and in the local economy stayed steady, while confidence in the national economy fell. Stress levels dipped to pre-pandemic levels, with only 47% of small business owners extremely/somewhat stressed about the ongoing pandemic, inflation, rising costs, and economic uncertainty.

More than 84% experienced a cash shortfall within the past year—down from 91% in the previous year but almost double the rate pre-pandemic—leaving small businesses to draw on cash reserves, explore business loans, and look to owners to supplement cashflow with salary suspensions or personal funds.

The renewed resilience that many businesses are feeling is well earned as the past two years tested small businesses in many ways, with 65% experiencing supply chain problems and staff shortages leading 81% to take action to retain staff and 67% to enact significant workforce changes. Increased supply costs and higher wages both cut into profitability and resulted in several actions in each area to keep business on track.

Increasing sales efforts is by far the top business priority and an area where small businesses are concentrating their investments. Ninety-one percent of small businesses are investing in marketing and sales, including social and search engine marketing, online presence and ecommerce, and email and text campaign marketing to meet that sales growth goal.

Top investments to achieve business goals

Percentage of small businesses investing in:

Increasing sales efforts
37%
Improving internal processes
24%
Developing new products
22%
Increasing use of digital/online channels
20%
Boosting digital marketing
20%
Improving financial reporting/cash management
18%
Employee training/developing skill sets
18%
Planning in turbulent times

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.

Preparedness for unplanned events

Percentage of small businesses saying they are prepared for:

Loss of key customer
59%
Economic downturn
59%
Loss of key employee
59%
Loss of key supplier
59%
Natural disasters
51%
Investing in growth

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.

Plans to find funds in 2022

Percentage of small businesses saying they'll fund their businesses with:

Use cash on hand
38%
A business credit card
36%
A personal credit card
25%
A business loan or line of credit from a bank
25%
Funds from your personal accounts, including retirement savings
21%
Small Business Administration (SBA) Loans
20%
What the fastest growing businesses are doing

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:

Reacting to supply chain, labor shortage, and inflation challenges

  • More likely to address supply chain issues by finding new sources of supply (+27%) and focusing on local suppliers (+36%)
  • More likely to attract/retain staff by increasing wages (+43%), offering work from home options, providing professional training and skill development (+56%), adding hiring bonuses (+58%), and making referral bonuses (+45%)
  • More likely to address inflation by reevaluating my pricing versus competitors (+46%) and passing on price increases (+20%)
Outlook and goals
  • More concerned about rising costs (+31%), inflation (+30%), and financing my business (+52%)
  • More concerned about finding new customers (+26%)

Investment

  • More likely to prioritize investment in digital marketing (+72%)
  • More likely to invest in social and search engine marketing (+41%), online presence/website (+49), email/text, and campaign marketing (+16%)

Cash reserves

  • Keeps cash on hand to cover 10% more days of expenses

Reset your business for success in the years ahead.

Our teammates bring firsthand advice and expertise for every stage of your business. Set up an appointment with a Truist branch teammate today, call 877-279-3083 to speak with a Small Business Consultant, or visit Truist Small Business to learn how we can help your business reach its goals in 2022.

call 877-279-3083 to speak with a Small Business Consultant, o