Small businesses continue to struggle to manage high inflation, supply chain headaches and labor challenges, but most feel optimistic about the future, according to the 2023 Small Business Insights Report prepared by the insurtech Counterpoint.
“The resilience and agility of small businesses continues to be tested by an increasingly volatile operating environment,” Counterpoint CEO Tanner Hackett says in the report’s introduction. “They have had to make some difficult decisions that impacted their operations and employees over the last few years, but maintain a positive outlook.”
The report gathered insights from 300 small business owners and CEOs nationwide. From those interviews, researchers determined that 45% of CEOs and small business leaders believe the economy has improved over 2022, and 53% are optimistic about the future. Business leaders in the finance and banking sector appear most optimistic about the future followed by those working in tech and the food and beverage industry.
However, inflation remains a top concern, with many small business leaders anticipating that this will continue to be a challenge when it comes to sourcing materials, paying employees and covering interest payments. “They’re having difficulty with cash flow, which means they have to make tough decisions,” Hackett said in a recent interview with PropertyCasualty360.com.
Labor spending is the top area where businesses are cutting back, according to the Counterpoint report. What’s more, supply-chain issues persist along with a lingering concern over regulatory demands, and both of these dynamics can lead to insurance claims. This dynamic may also be why, although they’re optimistic about the future, roughly two out of three CEOs and business owners anticipate the tough operating environment will continue into 2024.
“Businesses are more and more aware of their exposures,” Hackett said. “They’re also reliant on their [insurance advisors] for guidance and support.”
The report found that more than half of today’s small business leaders are either actively looking for a new insurance agent or broker, or considering it.
“The dynamic environment that they’ve been operating in has been sobering,” said Hackett, underscoring that the last five years have seen business leaders weathering the pandemic, supply woes and shifting workplace mores.
“They’re realizing that they have to be proactive” about insurance coverage, Hackett said. “It’s important that they find the right risk management partners, in terms of retail agents and also the right coverages.”
The Counterpoint report concludes with several predictions for small business owners and their insurance advisors. These predictions can help frame business and insurance strategy as the calendar flips to 2024.
- Expect the battle for talent to persist;
- Focus on strong workplace culture and teams;
- Cost pressures will continue to built;
- AI adoption will become “table stakes”;
- Renew the focus on risk reduction;
- Carriers have a role to play in risk reduction; and
- Insurance advisors can capitalize on challenges in order to better serve clients.
“As operating risks for small businesses continue to evolve,” the report concludes, “insurance agents will need to engage with their clients more proactively to help them avoid coverage gaps.”