SMB owners have a tough job: keeping businesses afloat in an economy often dominated by larger, wealthier competitors. Despite this sometimes uphill battle, SMB optimism levels are generally high. Overall, these businesses grew more optimistic about their survival in 2024, reported stable or growing revenues and sought to improve their processes or increase marketing.
If these trends continue, the year ahead could be particularly kind to SMBs. Channeling this growing optimism into new value-added opportunities could help these firms even the playing field between them and their larger competitors.
These are just some of the findings detailed in “A Good Year: Why SMBs Grew More Confident In 2024,” a PYMNTS Intelligence report. This edition examines SMBs’ evolving economic attitudes throughout the past year and draws on insights from a survey of 573 SMB owners conducted from Nov. 8, 2024, to Nov. 25, 2024.
SMBs Gained Optimism Throughout 2024
Fewer SMBs reported declining revenue throughout 2024, and more feel they will survive.
SMBs’ optimism levels steadily increased throughout the past year, and metrics can help explain why. In October 2023, 17% of SMBs said their revenue was declining, but by November 2024, just 15% reported this. That may appear to be a small percentage drop, but it represents many more businesses seeing success.
This percentage saw several ups and downs throughout the year, with the proportion of SMBs with declining revenues spiking to 23% in January 2024 and falling to as low as 13.5% in September. However, the trend of subtle improvement persisted when averaging out the peaks and valleys.
With more businesses reporting healthy revenues, fewer businesses fear the prospect of having to close. In January 2024, 7.3% of SMBs were worried about their survival, but this number dropped to 5% for most of the year. The one exception was November — U.S. election season — when the share rose to 6.8%. As that has passed, we anticipate expectations for survival to return to the baseline.
Survival of the largest?
Smaller SMBs were much more concerned about their survival than their larger counterparts. Just 1.8% of SMBs with annual revenues of more than $1 million said they were slightly or not at all likely to survive the next two years. For firms with less than $150,000 in annual revenue, nearly 10% reported they were unlikely to survive.
Headcount trends were similar. While 3.1% of firms with more than 26 employees reported that survival was unlikely, the share spiked to 11.3% for firms with five or fewer employees.
Predictions of survival also differed greatly by industry, with SMB retailers six times more likely than hospitality SMBs to predict they would not survive the coming two years (12% versus 1.8%, respectively).
Larger SMBs More Likely To Report Growing Revenue
Hospitality firms were most likely to report successful metrics in 2024.
It should be noted that across all industries and sizes, SMBs had largely good news to share. More than 50% of SMBs said they had growing revenue, and just 15% said revenue was declining. In other words, SMBs were 3.4 times more likely to report growing revenues than they are to report declining revenues, painting a positive picture of the current economic environment.
Revenues are important for many reasons. As visible in Figure 2 above, 19.5% of SMBs with decreasing revenue this year said they were unlikely to survive. In fact, data analysis revealed that the biggest predictor for reported chances of survival was revenue. In that context, so many more SMBs exhibiting growing revenue than declining revenue suggests that these businesses overall are trending towards health and stability.
Size also plays a factor here. Two-thirds of businesses with more than $1 million in annual revenue said they were growing, as opposed to 43% among SMBs generating $150,000 or less.
By industry, hospitality firms were most likely to report growth; 57% did so. On the other side of the coin were personal and consumer services firms.
SMBs Channel Their Success Towards Value-Add Opportunities
SMBs with positive growth were more likely to increase marketing and introduce loyalty programs.
The degree to which these businesses reported growth in the past year jumped out in the data. PYMNTS Intelligence found that approximately one-third of SMBs with growing revenues in the past year grew their revenue by more than 25%. Hotels, restaurants and other hospitality SMBs who are growing were the most likely to expand by more than 10%.
Retailers were volatile: the most likely of any group to grow by more than 25% but also the most likely to report less than 10% growth. This dichotomy could be indicative of cutthroat nature of retail in general: those that do grow can grow immensely, but at the expense of competitors that have now lost some of their customers.
Regardless of the exact cause of growth, SMBs that saw growth aren’t taking their feet off the gas. Instead, they are devoting these increased earnings towards value-add initiatives that could spur their growth even further. More than 70% of those that grew by more than 25% said they increased their marketing and outreach to potential customers. These growth leaders were 37% more likely to do so than those that grew by less than 10%.
Growing SMBs also invested in other value-add ventures such as expanding products or services, developed new business processes and cut production costs. Nearly 9% of businesses with less than 10% growth said they had no particular strategy, as opposed to 2.4% with more than 25% growth.
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Methodology
“A Good Year: Why SMBs Grew More Confident In 2024” is based on a survey of 573 SMBs conducted from Nov. 8, 2024, to Nov. 25, 2024. The report explores these businesses’ revenue growth and concerns about survival throughout 2024, and what initiatives they are undertaking as a result of this growth.
