The U.S. economy is going full steam ahead, and small businesses are doing well. But according to the inaugural “2019 State of SMB Finance Report” from ScaleFactor, 52% of the businesses in the survey didn’t hire any new employees in the past 12 months.
2019 State of SMB Finance Report
The 2019 State of SMB Finance Report points out several impediments which are preventing businesses from making new hires. This is despite the fact only 4% of businesses saw a decrease in revenue over 2018. For the whopping 96%, things are looking good. So much so, they see stable or growing revenue numbers for 2019 compared to 2018.
However, higher revenue doesn’t mean a company has to expand or make new hires. But for those that do, the issues the report highlights come into play.
The biggest impediment to hiring is salary costs, which is the case for 18% of the respondents. The high cost is four times more likely to be a deterrent than the current competitive labor market. But it goes without saying both factors are driving each other as the unemployment numbers keep getting lower.
The other barriers to hiring are skills shortage (13%), the cost of healthcare/benefits (10%), and a competitive labor market (4%). But the majority of the respondents or 55% say they are not experiencing any impediments to hiring new employees. So even with these challenges, more than half of small businesses are hiring.
The 2019 State of SMB Finance Report
The inaugural ScaleFactor Report comes from a survey of 500 randomly-selected principal decision makers from U.S.-based SMBs in May 2019. This includes financial decisions impacting growth prospects.
The data set covers revenue growth, hiring trends, and funding related to the benefits of financial technology. As more small businesses adopt new technologies to improve operations, the proper implementation is becoming very important in an intelligent workforce.
The founder and CEO of ScaleFactor, Kurt Rathmann, addressed this particular issue in the press release for the report.
Rathamann says, “We are experiencing a new phase that focuses on capturing the efficiencies of an intelligent workforce through the use of insightful and prescriptive technology. Complex back-office operations can now be consolidated into one intuitive ‘business OS’ that provides a foundation for owners to focus on growing their business.”
Funding Growth
When it comes to funding growth, the size of the business plays a big role on how they get the capital. While very small businesses (VSB) reinvest company profits (34%), small businesses (SB) use credit cards (43%). It is only medium sized businesses (MB) who are using financial institutions (62%) in higher numbers for their funding needs.
Overall, businesses are using personal savings (26%), line of credit (18%), institutional loans (16%), loan from acquaintances (6%) and more.
Relating to finances, small businesses are now becoming more aware than ever of the role financial technology software. However, the number is still very low. And again, large businesses are taking advantage of the technology while their small counterparts are lagging behind.
Financial Technology
Only 13% of VSBs currently use AI/machine learning as part of their accounting solution. It goes way up for SBs at 41%, and even higher for MBs at 72%. Very small businesses are also more reluctant/concerned about using the technology as well as not knowing it is an option.
As to how they are using accounting/back-office technology, it is spread across the finance spectrum. And it remains consistent across all three sizes.
More than three in four or 76% use it for bookkeeping, followed by 61% for invoicing. Payroll was next at 60%, bill pay (55%), budgeting (45%), report generation (40%), and financial forecasting (27%).
The Benefit of Financial Software Technology
According to the report, 76% of small businesses don’t have a full-time or fractional CFO, nor do they have plans to hire one. This is being driven by the increased reliance of financial software technology by small businesses.
When properly implemented, the right software will automate tedious and time-consuming tasks which drain small business resources. The technology not only saves time, money, and human capital, it also lowers the number of mistakes a business makes.
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