Small Businesses Are Struggling To Stay Open: What Can Be Done To Save Them?

Small businesses in America seem to be facing continued hard times, even after the effective end of the COVID-19 pandemic — a pandemic that forced one-third of U.S. small businesses to close, according to Vice President Kamala Harris, a statement ranked as "mostly true" by PolitiFact. Citing Yelp data from early on during the pandemic (September 2020), the Foundation for Economic Education indicated that 60% of small business closures as a result of the lockdowns would be permanent.

The years since have not been particularly kind to Main Street, either. Persistent inflation, relatively high interest rates, a housing and cost-of-living crisis, and other factors have curtailed consumer spending habits, a reality that directly impacts the ability of small business owners to produce revenue. Businesses have also reported difficulty in finding qualified employees, as Fortune reported earlier this year.

Per Fortune, National Federation of Independent Business (NFIB) Chief Economist Bill Dunkelberg laid a great deal of the problems facing small business owners at the feet of macroeconomic pressures.

“Owners continue to manage numerous economic headwinds,” Dunkelberg said, adding that “inflation has once again been reported as the top business problem on Main Street.”

Small Business Sales Are Down, Prices Are Up, and Optimism Remains Below Historic Levels

According to FOX Business, quoting data from the NFIB, "A seasonally adjusted 20% more [small] business owners reported lower sales in the past three months, the lowest since July 2020." The outlet further shared that 26% of small business owners polled had increased their prices in October.

The NFIB data did indicate a very slight uptick in its Small Business Optimism Index (rising 2.2 points in October to rest at 93.7), but there was one major caveat: That figure still represented the "34th consecutive month below the 50-year average of 98."

A recent report from PYMNTS painted a similarly gloomy picture. Data from a PYMNTS Intelligence report suggested that nearly half (45%) of U.S. small business owners forego their own paycheck due to a lack of cash flow and that nearly a quarter (22%) struggle to pay basic bills — a situation that could mean imminent closure for these enterprises.

What Can Be Done To Save America's Main Street, if Anything?

While most recent reports have taken on a pessimistic tone, several solutions are being floated in terms of lawmakers and entrepreneurs that may work to improve the current state of affairs concerning U.S. small business.

For its part, on Nov. 20, the NFIB sent a letter to Congress requesting a list of desired legislative priorities affecting its membership. Chief among its requests:

• Make the 20% Small Business Tax Deduction permanent.
• Eliminate or delay the Burdensome Beneficial Ownership reporting mandate for 32.6 million small businesses.
• Eliminate red tape for small businesses through bipartisan legislation like H.R. 7198, the "Prove It Act."

Though not all of the NFIB's asks are enumerated above (others pertained to adding competition into the credit card swipe fee marketplace and preventing unintended 1099k triggered audits), the organization was clear in its demand to be heard.

“Small business uncertainty is at an all time high, and much of this stems from the fact that there is a looming tax hike on over 30 million small businesses in just over one year,” said NFIB VP of Federal Government Relations Jeff Brabant.

“With the 20% small business deduction scheduled to expire, and burdensome beneficial ownership reporting requirements just around the corner, now is the time for Congress to proactively address the key issues impacting Main Street and prioritize legislation to help American small businesses grow, invest, and flourish," Brabant added.

PYMNTS focused on a different angle, suggesting that automation of accounts payable (AP) and accounts receivable (AR) would vastly improve cash flow and operational efficiency. Furthermore, the outlet suggested that by "consolidating multiple cash flow tools onto a single platform," small-to-medium businesses (SMBs) could save 20 hours per week in wasted labor.

"SMBs should consider adopting digital solutions and collaborating with FinTech providers. Automation can optimize working capital management by predicting optimal times for AP and AR processes and encouraging shorter payment cycles. By unifying cash management tools and using technology, SMBs can streamline operations and promote growth, moving from financial instability to a more prosperous future," PYMNTS stated.

Boomers May Hold the Keys to Small Business Prosperity — If They Opt To Spend

Veteran Wall Street economist Ed Yardeni provided his thoughts on the subject, as Fortune outlined.

Not only will fading inflation and the proliferation of AI into various economic sectors help to spur growth, creating something of a new "Roaring '20s," as Yardeni indicated, but the immense amount of wealth still held by baby boomers ($76.2 trillion of a total U.S. household wealth estimate of $156.2 trillion, as of late 2023) could unlock further prosperity. That's if they opt to continue to spend.

"This helps to explain the resilience of the economy and why there hasn’t been a consumer-led recession over the past two years, as was widely feared,” Yardeni wrote. “The baby boomers watched a lot of 'Star Trek' during the 1960s. They certainly took to heart Spock’s mantra ‘Live long and prosper.’ He should have finished the thought with ‘Then retire and spend it all before your expiration date.’”