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Majority of SMBs Expect to Return to Pre-Pandemic Profitability

Majority of SMBs Expect to Return to Pre-Pandemic Profitability

March 15, 2022
A majority, (54%)also expect to see their employee numbers increase over the next year.

Small and mid-sized businesses (SMBs) – which represent two-thirds of global jobs remain resilient and confident in the face of current market challenges, according to a new survey called, "Small Business, Big Opportunity," by Sage. 

The majority of SMBs believe that the aftermath of the pandemic can be an opportunity to promote more sustainable development. And the survey revealed that COVID-19 has unleashed a new generation of toughened-up entrepreneurs

However, these companies warn of rising costs and the need for more government support and better financing options to weather these conditions over the next twelve months.

Looking at responses from the more than 2,000 U.S.-based businesses versus the overall global average, the survey found:

  • Confidence among U.S. decision-makers is higher than average regarding the upcoming 12 months, whereby almost three quarters (73%) feel confident about the success of their business – four percentage points higher than the global average (69%).
  • In terms of revenue over the next six months, SMB decision-makers in the U.S. are more positive than the global average. A majority (54%) expect their revenue to increase, compared to just 49% on a global level.
  • Moreover, 54% also expect to see their employee numbers increase over the next year, which is significantly higher than the global average of 46%. This includes as many as 22% who expect to see a significant increase, while only 13% of SMBs globally expect the same.

Key global findings from the research include:

Rising costs and concerns about inflation are keeping businesses up at night

  • Over a third of businesses are still not operating as normal due to the pandemic and are now facing the prospect of further challenges
  • Approximately four-in-ten businesses (39%) expect rising inflation and cost pressures (including rising rent and utilities) to persist as the main risks to their business in the year ahead, significantly impacting growth prospects
  • Nearly 10% of SMBs, representing more than 6.1 million jobs in the markets surveyed, are at risk of disappearing completely

However, business confidence remains strong globally, despite – and often because of – ongoing pandemic pressures Most businesses globally feel more resilient and better prepared to overcome major barriers now than before the pandemic because of the adaptations they have made over the period, including investment in technology

  • 69% of business decision-makers feel confident that their company will be successful 12 months from now, compared to 58% that felt confident this time last year
  • Optimism is starting to filter through into profitability, with four in five (81%) SMBs expecting to be at least somewhat back to pre-pandemic levels of profitability
  • By sector, the businesses that are most optimistic about their success 12 months from now are in the nonprofit, healthcare, education, financial services, construction and technology industries

SMBs expect to increase hiring and remain optimistic about staffing over the next twelve months

  • Nearly half (46%) of businesses surveyed expect to hire more people in 2022 – on average, SMBs expect their workforce to increase by 12%
  • This could lead to the creation of a potential 3.8 million new jobs, including 1.6 million jobs in the United States
  • 35% of SMBs saw their workforce shrink in the previous year but 65% are confident that they will be able to meet their staffing needs over the next 12 months

Government and financial support are crucial to business survival

  • Government support was identified as the single most important resource to contribute to SMB growth over next 12 months (31%), with financing (25%), including bank loans and grants, and better management of cash flow (25%) also noted as key factors to success
  • One in five highlighted lack of government support as a key challenge over the past twelve months
  • The businesses that received government financial support (21%) feel more resilient and better prepared than those that did not receive funding

A majority want to seize the opportunity for more sustainable development

  • 86% of SMBs expect to make a change to become more sustainable in the year ahead, with companies founded during COVID more likely to make this change
  • Over half of SMBs (55%) identified sustainability as being important to their business, with 17% describing it as central to what they do
  • Around 80% are feeling pressure to reduce their environmental impact, with pressure coming from customers (31%), the government (25%), employees (24%) and the supply chain (22%)
  • A majority of SMBs believe that the aftermath of the pandemic can be an opportunity to promote more sustainable development in their countries and local communities

Out of the darkness, a new generation of confident business owners has emerged Businesses founded during the pandemic report larger-than-average barriers to success, but remain more confident about the growth they can achieve in the upcoming year

  • 42% of businesses founded during the pandemic were by young people (aged 18-34), with the principal decision-makers more likely to be men (61%)
  • These ‘Generation COVID’ businesses are much more adaptable, with less than one-third stating that the pandemic negatively impacted their operations
  • These ‘Generation COVID’ companies are more confident they will generate revenue growth in the next six months (57%) vs. those founded pre-pandemic (48%)
  • However, in comparison to businesses founded pre-pandemic, fewer ‘Generation COVID’ SMBs are satisfied when it comes to their current staffing levels (56% vs. 65%), ability to recruit talent (51% vs. 58%), and productivity (58% vs. 68%)

“The incredible contribution of SMBs to global prosperity, recovery and growth cannot be overlooked. Similarly, their confidence cannot be taken for granted,” said Steve Hare, Sage Group CEO, in a statement. “Governments need to keep small and mid-sized businesses at the forefront of decision-making, and to implement policies that knock down the barriers that stand in their way so that they can fulfill their potential.