AI, Inflation, and Geopolitical Instability: The biggest concerns of SMBs to run their operations
- Despite facing economic and sociopolitical challenges, entrepreneurship has been consistent over the last couple of years.
- SMB leaders believe investing in technology can be a good first step to offset increases in operational costs and improve revenue.
It’s been a rough few years for businesses at large, but small businesses (SMBs) have been more affected by inflation than others. After small businesses weathered the pandemic, their operations, and profits took a beating at the hands of rising costs, equating to fewer sales, increased overhead, and employee costs among other things.
The good news is that despite facing economic and sociopolitical challenges, entrepreneurship has been almost consistent over the course of the last couple of years. 5.4 million applications were filed to start a US business in 2021 followed by 5.1 million in 2022, according to a new survey. Around the same time, COVID-19 wreaked havoc but also set the stage for digital adoption and technological advancements among businesses.
The AI hype
The expansion in Artificial Intelligence (AI) is one of the more significant technological advancements that presented its potential during the pandemic. It has garnered attention among businesses of all sizes. The survey shows that SMBs have a sense of optimism around the implementation of applied and generative AI capabilities within their workflows or direct integration into their products and services, thereby automating daily operations and improving customer service outcomes.
40% of SMB owners also believe the evolution in AI will increase their income in the next 12 months. On the other hand, 69% of American workers are of the opinion that their income will stagnate or decrease during the same period. However, the majority of SMBs (45%) and other American workers (53%) believe AI will not have any notable impact on their income in the next year – at least at the moment.
Although SMBs are bullish about investing in AI tools in the near term, some employees maintain the stance that much more remains to be done around learning the nascent technology, skill sets, and infrastructure to implement it effectively and limit risk.
Additionally, while AI may present an opportunity for business owners to upskill their operations, some see it as a threat to their jobs. This opinion varied across different pay brackets. 42% of SMB and other American workers making at least $100,000 per year believe generative AI will catalyze their income in the next year as opposed to 22% of workers whose salaries are under $100,000 think otherwise.
Women entrepreneurs feel a bigger pinch as inflation bites
While rising costs have left entrepreneurs grappling with its adverse effects, the situation is worse for women entrepreneurs two-fold. Despite women creating about half of new US businesses for the third consecutive year in 2022, they are often at a disadvantage of unequal access to loans, funding, and growth. This can result in a lack of improvement in the financial position of female SMB owners.
62% of SMB owners found it hard to make ends meet with their salaries over the last year, and 60% believe the same scenario will continue in the next year. However, the survey found that this situation has a drastic gender divide – 72% of female business owners say they failed to keep up with inflation in their current salaries over the past year, compared to male business owners, 49% of whom felt their income took a hit.
While the current SMB landscape may be far from providing equal footing for women entrepreneurs and minorities, the odds may improve -- if the segment accesses a more level playing field equipped with a range of accelerator programs, networking groups, and funding opportunities to move the needle on a more inclusive industry.
The conundrum of geopolitical instability
SMBs believe international development is key to growing their businesses and achieving their goals. However, those trying to expand their global footprint are mostly faced with limited resources, capacity, and bandwidth to take on international markets or maintain their supplier relationships across countries. Additionally, geopolitical instability further compounds international trade. 42% believe relations with Russia will have a lasting negative impact on the business climate next year, while 37% are skeptical that political tensions with China will continue to deteriorate their export relationships over the same span.
Despite the current economic and geopolitical instability, investing in innovation and technology to digitalize workflows remains critical for small business leaders, who believe it can be a good first step to offset increases in operational costs and improve revenue.