Small Businesses Report Stable Business Environment with Cybersecurity as Primary Concern

The latest Small Business Index for the first quarter remains consistent at 62.3, mirroring last quarter’s score of 61.3, indicating a steady business climate. A notable portion of small businesses perceives economic improvement, contributing to a one-point increase in the headline score.

A growing number of small business owners, with one in three (32%), now view the U.S. economy positively, marking a seven percentage point increase from the previous quarter. Similarly, approximately two in five (38%) express optimism about their local economies, reflecting an eight percentage point uptick from late 2023.

The survey, sponsored by MetLife and the U.S. Chamber of Commerce, highlights cybersecurity and supply chain integrity as the foremost concerns among small businesses.

Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce, notes a gradual improvement in small businesses’ economic outlook, attributing it to enhanced comfort regarding cash flow and overall business health. Despite persistent challenges like inflation and rising wages, recent job reports provide a positive backdrop. Sullivan underscores the increasing resilience and preparedness of small businesses to tackle unforeseen hurdles.

Key Threats

The survey delves into small businesses’ apprehensions regarding future threats and their corresponding crisis management strategies. The top concerns identified are:

1. Cybersecurity – 60%

2. Supply chain disruptions – 58%

3. Potential future pandemics – 54%

4. Inclement weather – 45%

5. Theft – 42%

6. Natural disasters – 39%

7. Acts of terrorism – 37%

Although a majority (71%) of small businesses assert adequacy in preparing for future threats, most acknowledge being only moderately equipped to handle them. For instance, while 23% feel very prepared for cybersecurity threats, 50% deem themselves somewhat prepared. This gap widens further concerning readiness for supply chain disruptions, with only 14% feeling very prepared compared to 47% feeling somewhat prepared.

Mitigating Strategies

To address potential threats, small businesses are adopting various measures such as:

– Establishing rainy-day funds (62%)

– Implementing surveillance measures (56%)

– Providing cybersecurity training to staff (48%)

– Formulating contingency plans for future threats (43%)

– Obtaining insurance coverage for natural disasters (38%)

– Strengthening existing supply chains (35%)

A recent EY/Institute of International Finance-global survey of Chief Risk Officers (CROs) reaffirms cybersecurity as a paramount concern, with 68% ranking it highest. This is followed by geopolitical risks (56%), environmental factors (50%), machine learning, and artificial intelligence (43%), and workforce skills shortage/reskilling (41%).

Perception

Despite consistent satisfaction regarding cash flow and business health, small businesses’ overall perception of the economy remains subdued. Nearly half still view the economy negatively, citing inflation as a significant challenge (52%). Concerns regarding revenue have also escalated by seven percentage points this quarter, with 29% considering it a top challenge, reminiscent of levels seen in late 2021.

Conducted from January 26 to February 12, 2024, the survey maintains a credibility interval of plus or minus 4.4 percentage points for all respondents.