Small Business
Survey 2023

Verizon Business Fourth Annual State of Small Business Survey reveals small businesses are exploring emerging technology, such as artificial intelligence (AI), in order to confront a complex landscape marked by economic challenges such as inflation and cybersecurity risks.

Conducted in August of 2023 by Morning Consult, the Verizon Business State of Small Business Survey shows key data on the trends of small to midsize businesses among a national sample of 681 small to midsize business owners and decision makers.

Download full survey results

When it comes to saving time and resources, small to midsize businesses are curious about the benefits of artificial intelligence (AI). Among the areas of interest include back office tasks such as fraud management, supply chain operations, and order processing. But lack of awareness, uncertainty and fears over cybersecurity risks are holding them back from adopting AI across their business.

There is a notable knowledge gap among business owners when it comes to AI and a shortage of available resources to equip them with the necessary tools for AI implementation. Forty percent of small to midsize businesses currently do not employ AI solutions and lack awareness of their potential benefits for their business, while just over one-third of businesses (35%) are not using AI but are aware of how they could support their business.

These challenges are counterbalanced by the potential benefits: the data from the survey reports that nearly half (45%) of the businesses that do use AI see significant time efficiencies in their day-to-day operations, allowing them to focus on core business necessities.

• 45% of small to midsize businesses are concerned about integrating AI solutions into their businesses. 
• 43% are worried AI tools will open their business up to more cybersecurity risks. 
• On the positive side, more than a third (35%) of small to midsize businesses feel that AI can help their business offset pain points caused by reduced/frozen headcount. 
• 43% of small to midsize businesses agree that AI can help generate additional revenue streams for their business. 
• Of those that use AI, 45% of small to midsize businesses say that AI helps them save time in specific tasks/areas, enabling them to focus on their core business areas. 

In 2020, 27% of businesses upgraded their internet connection bandwidth. Since then, there has been a significant increase in businesses investing in bandwidth upgrades year after year (52% in 2021, 51% in 2022 and 53% in 2023), showing the imperative need for small to midsize businesses to have internet connectivity. 

Along with upgrading internet bandwidth (53%), enhancements to internet speeds (51%) and wireless signal (47%) remain common tech upgrades that small and midsize businesses say their business has made in the last year. 

Despite these investments in upgrades and technology, a substantial portion of businesses are still overlooking cybersecurity threats across the board.

•  Only 1 in 3 (33%) of small to midsize businesses have implemented new systems or technology to ensure security. 
• 45% of small to midsize businesses say their business does not offer employees training on cybersecurity practices. 
• 42% of small to midsize businesses have upgraded their network security services in 2023. 

Along with investing in new technology, small to midsize businesses are also raising prices and reducing non-essential spending to help alleviate some of these challenges.

Inflation remains a top concern for small to midsize businesses, impacting their costs and employee expectations, leading many to consider raising prices and cutting non-essential spending.  

• 90% of small to midsize business owners say they are concerned about the US economy generally, consistent with 2022 (89%). 
• 81% say they are worried about the effects rising inflation will have on their business. 
• 4 in 5 (80%) small to midsize business owners say their business has experienced increased costs in the last year, a figure that continues to grow year-over-year. 
• In response, nearly 3 in 5 small to midsize business owners have raised or have plans to raise prices of goods and services to offset the impacts of inflation (59%) and have reduced or have plans to reduce spending on non-essential items and activities (57%). 

Despite these challenges, many small to midsize businesses are forging ahead with a "business as usual" approach, striving to adapt and thrive in the face of economic uncertainty. This aligns with the survey findings from 2022, underscoring small to midsize businesses have a steady outlook despite the shifting economic landscape. 

And the data further shows that small to midsize businesses are faring well where it counts – reporting higher customer satisfaction rates and revenue compared to this time last year.

• Nearly half (49%) of small to midsize businesses are expecting U.S. economic conditions to get worse, 26% expect it to get better, and 22% anticipate that it will stay the same. 
• Nearly one in five (18%) of small to midsize businesses have implemented new systems or technology to compensate for a shortage of workers.
• Even though economic concerns for the future are still top of mind, small business owners say their customer satisfaction (43%) and overall revenue (38%) are higher now than in August 2022.

As small to midsize businesses prepare for a dynamic holiday retail season, the focus this year is on both online and in-store traffic. Small to midsize businesses are embracing technology to address labor challenges and remote collaboration, and finding resources and expertise in areas such as social media marketing to enhance their digital presence. In the face of uncertainty, they are demonstrating their ability to adjust, innovate, and explore new avenues for growth and efficiency.

For this year’s busy holiday retail season, staying adequately staffed (36%), supply chain disruptions (36%), properly pricing goods and services (34%), and economic hardships impacting sales (34%) are leading concerns as businesses owners look ahead to the 2023 holiday season.

• Nearly 2 in 3 small to midsize businesses (63%) say they typically see an increase in demand during the holiday season, an uptick vs. 2022 (56%). 
• Two in five retail small to midsize businesses owners (40%) say they are worried about not having enough inventory to meet demand, while 36% say they are worried about having too much. 

• When it comes to online vs. in-store traffic, 2023 expectations are largely in line with 2022 experiences – 35% say they had more online traffic than in-store traffic last year, and 35% expect this again in 2023.

Along with operational challenges, small to midsize business owners are making personal sacrifices to stay afloat, often spending less on themselves and their families, and nearly half of business leaders expect to work extended hours (46%) during the season. 

• Consistent with last year, about half (53%) of respondents say they plan to spend less money on themselves this coming holiday season compared to 49% in 2022.
• More than a third (36%) of small to midsize business owners are spending less on their own family and friends this holiday season due to economic conditions.
• Nearly half (46%) of business leaders expect to work extended hours over the holidays.

The ways in which business owners and their employees work continues to evolve. Small and midsize businesses are increasingly relying on technology to address the challenges of remote collaboration and labor issues in the evolving landscape of work and human resources.  

•  More than a quarter (27%) have implemented new systems to allow for remote collaboration in the past year.
• Nearly one in three (28%) of small to midsize businesses have provided new devices or technology to their employees to help attract or retain talent. 
• More than 3 out of 4 (76%) of small to midsize businesses believe mentorship is important for building community among small and midsize business leaders.

Small and midsize businesses are demonstrating a pressing need for more resources and expertise in the realm of social media marketing to enhance their business presence and customer engagement. 

Facebook continues to be the leading platform for small businesses for promoting products and connecting with customers, with nearly half of small businesses saying their business either began using or increased usage in the past year (49%). Instagram follows, with 39% of small business owners saying their business either began using or increased usage in the past year, followed by LinkedIn (27%), TikTok (25%),  and X (25%). 

• More than 3 out of 4 (77%) of small to midsize businesses either already are or are planning to use social media marketing to increase customer engagement and online traffic. 
• 69% of small to midsize businesses said that access to free social media marketing courses or programs that they can use on their own time would be helpful. 
• Over half (61%) of small to midsize businesses agree that having the ability to speak with e-commerce experts who can help establish a digital presence, digital branding, or social media engagement for your business via phone, chat, video, etc. would be helpful.