Small Business Outlook: Long-Term Confidence Amid Headwinds

Small business owners are largely optimistic about their business even though many report facing affordability challenges and external pressures on their operations, according to a recent self-reported survey conducted by the Capital One Insights Center and Capital One Business in partnership with Morning Consult. Although inflation remains top of mind for small business owners, many are also concerned about fluctuations in energy/oil prices, the potential contraction of the US economy and supply chain issues. 

Looking forward, most small business owners are taking steps to ensure they are prepared to navigate the changing economic environment. Additionally, they remain confident that their business will still be operating in the next six months.  

Methodology

Capital One partnered with Morning Consult to conduct a nationally representative, self-reported, anonymous survey on the perceived challenges and opportunities that small business owners have faced two and a half years after COVID-19 was declared a pandemic.

The survey was conducted between August 25 and September 9, 2022, among a sample of 1,295 small business owners, including 115 small business owners who started their business at least two years ago but after the World Health Organization (WHO) declared COVID-19 a pandemic on March 11, 2020. Small businesses are defined as those with total annual revenues of less than $20 million. 

Results from the small business owners have a margin of error of plus or minus 3 percentage points. Results from the small business owners who started their business near the beginning of the pandemic (n=115) have a margin of error of plus or minus 9 percentage points. 

Note: All data in this report is from self-reported, anonymous research of US small business owners broadly, not specifically from or about Capital One customers or employees.

Key Findings

• Nearly all small business owners are confident their business will be operating in the next six months (90%), consistent with results from March 2022. 

• While confidence in their business continues to be strong, small business owners faced a variety of challenges this past year, with inflation (58%) reported as the top issue. 

• Since March 2022, small business owners’ confidence in their ability to fill open positions in the next three months (76%) remains unchanged. To improve recruiting, small business owners have most commonly been offering more flexible hours (25%) or competitive wages (18%). 

• Running a small business in the past year has reportedly taken a toll on some small business owners. Nearly half (48%) say they are either currently experiencing or have experienced burnout in the past month, where burnout is defined as a syndrome resulting from chronic stress at work that is characterized by overwhelming exhaustion, negative attitudes, or a lack of commitment with clients and dissatisfaction with job performance.

• One-third of small business owners who have or have had student loan debt report that student loan debt has negatively impacted their ability to scale or grow their business (33%). A majority (76%) of small business owners who have student loan debt say that President Biden’s plan to forgive $10,000 in federal student debt for individuals earning less than $125,000 will allow them to invest more into their business.

• Over half of small business owners who have student loans say that the student loan repayment, interest and collection pause during the COVID-19 pandemic has allowed them to invest more into their business (56%). Forty-four percent say that the pause has not had an impact. 

• Entrepreneurs who started their business at the beginning of the COVID-19 pandemic say it was challenging to do so (79%). Despite challenges faced, 24% say their business grew faster than expected. Over a third of those entrepreneurs said they started their business because they had more time (36%), a greater share than those who started because they were laid off (26%) or able to scale their hobby into a business (24%).

A Closer Look

Although small business owners are confident about their immediate future, they report varied challenges that affect long-term business affordability.  

• Nine in 10 small business owners are confident their business will be operating in the next six months, with more than half (57%) saying they are “very” confident. While they are confident in their business’ future, less than half of small business owners say local business conditions are either excellent or good (44%).

• In the past year, inflation (58%), cash flow (40%), and low sales (35%) have been the biggest challenges for small business owners. Since the March 2022 report,  inflation has been a growing challenge for small business owners, with 47% of them citing it as a challenge in March versus 58% in September.

• Thirty percent of small business owners have found supply chain issues to be challenging. Over half say they have experienced increased costs of supplies and materials (51%). Other top supply chain challenges small business owners report include product shortages and supply disruptions (37%), increased shipping or delivery costs (36%), and shipping delays (36%).

• Small business owners are also concerned about continued fluctuations of energy/oil prices (78%), the potential contraction of the United States economy (77%) and continued supply chain issues (76%) negatively impacting their business in the next six months. A majority are also concerned about geopolitical conflict (59%), the proliferation of extreme weather events (56%), and the continued impact of COVID-19 (53%) negatively impacting their business operations, such as staffing or sales.

Small business owners are also confident in their ability to fill open positions amid hiring challenges such as wage and job fit.

• Small business owners who have had challenges hiring in the past three months say it has been difficult to offer the wages prospective employees are asking for (44%) and to find qualified candidates (39%). Small business owners have experienced more challenges in this job market with 26% saying it has been challenging to hire new employees in the past three months, up 6 points since the March 2022 report. Despite recent hiring challenges, most small business owners are confident (76%) they will be able to fill open positions in the next three months.

• Nearly half of small business owners report they have not changed their hiring practices (49%) since last year. However, those who say they have changed their hiring practices in the past year have most commonly been offering more flexible hours (25%) or competitive wages (18%) to improve recruiting. 

Since the March 2022 report, business owner burnout levels haven’t improved. 

• Forty-eight percent of small business owners say they have experienced burnout in the past month. Business owners who also identify as caregivers are more likely to say they have experienced burnout in the past month (53%) than other business owners. Similarly, female business owners (53%) are more likely to say they have experienced burnout in the past month than their male counterparts (41%).

• Approximately 7 in 10 small business owners report at least some mental (72%), physical (69%), or emotional (68%) exhaustion caused by the stress of running their business in the past year. Caregivers are even more likely to report mental (77%), physical (77%), and emotional exhaustion (75%) compared to other business owners. Most small business owners report feeling run down and drained of physical or emotional energy (61%) and are constantly worried about their business’ finances (59%). Exercising (17%) and spending time with friends and family (17%) are cited as what most positively affects their well-being.

A plurality of those small business owners who started their business near the beginning of the pandemic say they did so because they had more time (36%).  

• Nearly 8 in 10 of these small business owners say it was challenging to start and build a business during the pandemic (79%). They cite inflation (42%), cash flow (40%) and low sales (36%) as some of the main challenges of starting and building a business during this time. Despite these challenges, 24% say their business has grown faster than expected and 47% say it has grown at the expected pace.

• While starting a business near the beginning of the pandemic was challenging, some small business owners shared in open-ended responses that working for themselves has been rewarding. The ability to spend more time with their families, to have a more flexible schedule, and to know they could be successful by themselves are cited as some of the reasons starting a business during a difficult time has been rewarding for these owners.

• Seventy percent of these small business owners report either slightly or completely changing their business model or offerings since they started the business. Common reasons for changing their model or offerings cited in open-ended responses include increasing their product lines or services offered, lessons learned as they grow the business, and overall maturing of the business.

• Networking (41%) and webinars or online trainings (36%) were cited as the most helpful resources when starting and building their business during the pandemic. Over 1 in 5 also cite business podcasts (24%), online articles (24%) and local or virtual business associations (22%) as helpful.

Small business owners continue to face personal and professional challenges as they navigate a changing economic environment and labor market. But those surveyed are still largely optimistic about the future of their business. Innovation, technology, and policy stand out as positive trends that may be fueling that optimism, as entrepreneurs explore different hiring practices, rely on digital tools, and benefit from student loan relief that allows them to invest more in their businesses. And through a worldwide pandemic, new businesses started and grew, buoyed by resources and support in the business community.

About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 

About Capital One Business

Capital One® offers a broad spectrum of financial products and services to consumers, small businesses, and commercial clients. Capital One Business offers a diverse suite of financial products, tools and services designed specifically for small businesses, including credit cards with unlimited rewards and banking products and services. Capital One Business is committed to fueling the courageous entrepreneurial spirit that's at the heart of American small businesses. We are focused on listening to and learning from the millions of businesses we serve every day to make sure our products, services and experiences work as hard as they do.

About Morning Consult 

Morning Consult is a global decision intelligence company changing how modern leaders make smarter, faster, better decisions. The company pairs its proprietary high-frequency data with applied artificial intelligence to better inform decisions on what people think and how they will act. Learn more at morningconsult.com.

Disclaimer 

This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insight Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable. 

The data relied on for this report are based on self-reported survey data from anonymous respondents across the U.S. Survey respondents included may or may not have relationships with any number of financial institutions and/or products. Capital One Insights Center does not know, nor is it able to determine, if any of the survey respondents have a relationship with Capital One. Certain information herein is also based on data obtained from third-party sources believed to be reliable. 

Analysis and conclusions constitute the Capital One Insight Center’s judgment as of the date of this report and are subject to change without notice. Furthermore, the analysis and views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. 

Any opinions expressed herein should not be construed as an individual recommendation for any particular customer or client and is not intended as advice or recommendations of particular securities, financial instruments, market conditions or strategies. Capital One Financial Corporation and its affiliates and/or subsidiaries may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.