There’s a certain feeling in the air that the world is recovering. A third of U.S. adults have been vaccinated (with a ways to go), and a light at the end of the tunnel. Beyond a general heir of optimism, data continue to validate economic signals such as SMB reopenings en masse. We broke down one such data set this week.
To double down on that validation, another data set recently came to our attention from Kabbage. Its Small Business Recovery Report surveyed 550 SMBs, tiered into different sizes ranging from 10 to 500 employees. It looked specifically at growth and recovery indicators such as headcount, revenue, profit and digital adoption.
So what did the report find out? Starting at the top, 57 percent of SMB respondents report that their businesses are fully open. Notably, “open” means something different than it used to, thanks to Covid-shifted perspectives. Specifically, a third of SMBs report online operations, either exclusively or in a hybrid model.
To validate that these online-heavy models are indeed Covid-induced, SMBs report a greater share of online revenues than pre-pandemic. Specifically, they report 57 percent of revenues are online in the aggregate, compared to 37 percent prior to the pandemic. This is a 54 percent increase in one year.
How does this online/offline mix look going forward? 33 percent of SMBs plan to expand online operations to replace or supplement in-person business. The ability to do this of course varies by vertical category (think: chiropractors vs. music lessons), but aggregate projections towards hybrid operations is notable.
Meanwhile, only 15 percent of SMB respondents believe that they will scale down digital operations to pre-pandemic levels. Moreover, 77 percent report that they’re more amenable now than ever before to replace old systems and adopt new digital tools to streamline or optimize their operations.
When asked to define recovery criteria, the biggest factor that SMBs reported is paying employees full wages (50 percent). This was followed by proprietors paying themselves pre-pandemic salaries (47 percent), reaching pre-pandemic gross revenue levels (47 percent), and growing inbound demand (39 percent).
Circling back to an earlier point, there are of course many different sizes of SMBs; and behavior tends to vary widely between them. Kabbage factored that into its study, breaking its survey sample into three tiers that correlate to headcount. These include SMBs with less than 20 employees; less than 100; and less than 500.
How did they stack up? When looking at headcount, sales and profit, the top-two SMB tiers performed better than smaller SMBs (see above). The same goes for near-term outlook: The largest SMBs project 46 percent revenue growth while medium-sized SMBs project 40 percent and smaller SMBs project 13 percent.
In all cases, performance and outlook are mostly positive. The hope is that the Covid-era is remembered as inflicting some pain… but survivors emerged stronger (as hokey as that sounds). We’re not out of the woods yet, but positive signs of economic health persist, partly fueled by SMB digital adoption.
This is the accelerated transformation we’ve been talking about for the past year. Forced adoption has created a “mere exposure effect” to acclimate otherwise-laggard SMBs. That bodes well for sustained adoption: They’ve picked up new tools and aren’t necessarily going to put those tools down as things recover.
More about the study, including its methodology, can be found here.