We’ve long heard that small businesses are the backbone of the U.S. economy. And with 31.7 million such businesses, they are indisputably a powerful economic force.
Yet, just as the stock market is a composite of tech, healthcare, consumer and other companies with very different stories to tell, I’ve long believed that the statistics and data about the Small Business economy is lacking the granularity to better understand what is really going on.
In part, that’s because everyone from a sole proprietor to a company with 500 employees is considered a “small” business. And partly, it’s because all business types are intermingled: from brick-and-mortar stores, eateries and in-person service businesses, to entrepreneurs and freelancers who use, operate on, and sell via digital platforms.
By tracking the progress, confidence, fears, and needs of small businesses a layer deeper, we can better understand and support them with the products and services they specifically need — whether that’s at a government level through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans, or business loans and credit products from the private sector.
Here at Azlo, we just launched a quarterly “pulse” survey that polls our customers who run their businesses primarily online. This is an important — and growing — demographic with unique drives and needs, and one we intend to track in order to truly understand the Small Business economy. Our goal is to start tracking the confidence and optimism (or lack thereof) of the digital small business economy so we can index confidence quarter over quarter. We also hope to uncover demographic variations that will enable us to better understand the different experiences leading to a business surviving, thriving or failing.
In September, we surveyed over 1,000 of Azlo’s founders, entrepreneurs and freelancers, all running a digital business in the U.S. with less than 20 employees, and asked them the following questions:
Compared to this time last year, how has your business revenue changed?
Looking forward, how do you anticipate your business revenue will be one year from now?
Do you have any plans to hire employees or bring on other talent in the next six months?
Do you anticipate needing funds (loan, capital, etc) for your business in the next six months?
Imagine you are offered a full-time, permanent job working for someone else. How likely are you to consider that?
Of those whose businesses were up and running a year ago, 26% had seen improved revenues, while for 24% their business revenue has worsened.
And nearly 20% of founders reported that their revenue remained relatively the same. About a third were not in business a year ago, which may hint at the opportunity many have found to start businesses despite the turmoil of 2020.
Younger generations tend to be more optimistic about revenue growth overall, though all age groups generally share this trait.
Founders under the age of 40 were particularly optimistic about growth (nearly 3 in 4), although 40+ were still on the high side at 69%.
Plans to Hire Vary
It’s a mixed bag when it comes to plans for hiring: 27% of respondents stated they plan on hiring in the next year, while 54% do not plan to hire.
Anticipated Need for Funding
36% of founders anticipate needing funds in the next six months. The differences among founders in terms of race were the most striking. Breaking it down, a higher percentage of founders who identify as being Black or African-American or of mixed race anticipate the need to tap into capital in the next year. This percentage, compared to other groups, was in some cases more than double.
Committed to Staying in Business
Only 2% of respondents report that they would rather have a full-time permanent job. Half (49%) wouldn’t consider taking a job no matter how great, while a quarter (27%) might consider a job, but only a really good one. It suggests digital business founders are not doing this because they can’t find employment.
In fact, digital small business founders (23%) are holding a full-time job in addition to running their business as a side-gig.
As we start to better understand the nuances of different entrepreneurial groups, businesses and verticals, it should become clear that 2020 hasn’t been doom and gloom for all entrepreneurs, though undoubtedly it has hit brick-and-mortar small business hard.
With better insights into these varying experiences, I hope that collectively, fintech companies, banking services, and even local and federal governments can better support these digital founders on their road to success.