Yelp Inc., the company that connects consumers with great local businesses, released its first annual Small Business Pulse Survey, finding that 85 percent of American small businesses active on Yelp expect their revenues to grow in 2016, estimating an increase of 26 percent growth in the year ahead.
This optimism prevailed throughout the survey, with young companies leading the charge and predicting 48 percent growth over the next year. The "can-do" spirit of American businesses extended across a wide variety of industries, from foodservice, health and medicine to retail and home services. Small businesses in the restaurant industry that are active on Yelp were most upbeat about 2016, with 92 percent of respondents expecting an overall revenue increase.
Small businesses are a growing demographic of overall business owners in the U.S. They represent more than 99.7 percent of all employers, accounting for 55 percent of all jobs and 54 percent of sales in the U.S.; small businesses also produce nearly half of non-farm private gross domestic product (GDP).
"Small businesses are an important part of the economy. They provide roughly half of all private sector jobs, and also provide direct benefits to the communities that get to enjoy their goods and services," says Harvard University professor of business administration and Yelp's economist in residence, Michael Luca, an expert on how businesses influence local economies. "It's interesting to peek into the minds of small business owners, to see how they're feeling and what they're thinking about. This group of businesses is clearly optimistic, which is consistent with relatively strong consumer sentiment and a recent uptick in retail sales."
Despite this optimism, there is no shortage of challenges that small businesses confront. Yet, while media reports see small businesses worrying about health care costs and minimum wage compliance, Yelp's survey shows that small businesses see developing competitive growth strategies as their greatest challenge.
Specifically, the top identified issues include attracting and retaining customers (60 percent), managing a limited marketing budget (32 percent), and competition from larger businesses (30 percent). Neither health care nor minimum wage concerns troubled small businesses as much as growing their customer bases and rising above competition. Only 18 percent of businesses identified time spent on non-core business elements as the main disadvantage of running a small business.
"Small businesses worry about their own ability to grow, even as they remain optimistic," Dr. Luca adds. "Health care and other concerns, while important, seem to be less of a problem for many small businesses as they prioritize growth."
As advances in technology continue to break down geographic, economic and social barriers, an online community – increasingly known as the "Feedback Economy" – has evolved and allows consumers to share opinions, rate businesses and connect with companies of all sizes. Businesses surveyed overwhelmingly felt that feedback economy platforms like Yelp are giving them the digital tools and confidence they need to engage with and attract new customers: 85 percent of small businesses believe digital marketing has helped their business grow its customer base, and 91 percent use digital marketing tools such as social media platforms (75 percent), consumer review platforms (48 percent), and search engine advertising (48 percent).
"It's clear that the best local businesses value the feedback of their customers," says Jeremy Stoppelman, CEO of Yelp. "Consumers now have the power to effortlessly share their opinions and experiences, which is a game-changer, helping savvy small business owners quickly improve and grow."
The majority of small business owners agree that digital tools allow their companies to remain nimble and personal even as they scale rapidly. An impressive 79 percent of businesses surveyed believe that digital tools allow them to provide a more personal touch in their communities, enabling them to address the individual needs of their customers. Today's feedback economy—where customer-business interactions are easier than ever—is becoming an even bigger resource in helping small businesses build relationships and improve customer service.
"There's a misconception that only big companies have the capacity and resources to use sophisticated, high-tech marketing tools. Back when billboards and Super Bowl ads seemed like the only way to reach customers, small businesses were more constrained, but things have changed dramatically," Dr. Luca adds. "With an expanding set of tools to engage with customers, small businesses can leverage consumer feedback platforms to build higher-quality customer relationships."
Politically, small businesses share the same concerns as large businesses. The issue top of mind for small businesses surveyed is reducing the regulatory burden and simplifying the tax code, which could make the process of filing taxes faster and easier for small businesses. Small businesses—already facing a robust set of challenges to their growth and constant competition from rivals—support changes that would allow them to focus on these core issues and grow in 2016.