Small Business Confidence Index Finds SMBs More Optimistic and Focused on Digitization

Jim Magats, SVP Omni Payments

It’s been well over a year since the coronavirus began spreading around the globe, devastating economies and communities and impacting local businesses and populations. While many local economies are beginning to open back up, the impact of the pandemic continues to be felt, especially among the small business community.

As a partner to millions of small businesses around the world, PayPal understands the critical role they play in giving opportunity to the underserved, in developing communities and in driving local economic growth. To understand their needs and how we can work to move toward an inclusive recovery, PayPal partnered with Morning Consult for its second wave of the PayPal Small Business Index by Morning Consult1.

The survey of 500 U.S. small businesses2, fielded in April 2021, found increased optimism of small business owners, as compared to the inaugural index fielded in November 2020. The survey also found that even as economies begin to reopen, SMBs are looking to digitize even further, begin selling across channels, and invest in their businesses by upgrading their technology. What is now clear to SMBs, after seeing many digital businesses grow during the pandemic, is that digital payments and commerce are now table stakes, and that businesses need to enable these experiences to meet customer expectations.

The survey revealed three important themes:

  1. There is optimism about the future of the economy. Small business confidence is growing across the board, but digital SMBs are more confident than their physical-only counterparts.
  • The PayPal Small Business Confidence Index by Morning Consult has increased from 128 to 157 (+29 points)3 since the previous survey was fielded in November, showing that small businesses are increasingly optimistic about the future.
  • In April 2021, there were 22% more small business owners who felt increased optimism about economic conditions impacting their businesses in the next year, as compared to November 2020.
  • Growing optimism around the COVID vaccine has contributed to small business optimism for the future. Nearly three in five small business owners say the vaccine will improve economic conditions, and approximately two-thirds of currently closed SMBs say they will likely reopen in the next six months.

In-Person Payments

  1. SMBs indicate that digital payments and ecommerce are now critical to their success.
  • In both November 2020 and April 2021, small businesses that sell online-only or across channels scored higher on the confidence index compared to those who sell only in-person. SMBs that sell only in-person were as confident in April 2021 as their counterparts that sell online-only or across channels were in November 2020, during the height of the pandemic. It’s clear that digital commerce, and especially omnichannel commerce, is the future.
  • While in-person commerce will likely increase moving forward, online selling will continue to be a critical channel for SMBs. All of the small business respondents reported a significant increase in online selling during the pandemic compared to prior to the pandemic. Additionally, they expect to conduct 43% of their business online when the pandemic ends, compared to only 37% prior to the pandemic.
  • Interestingly, 31% of currently closed SMBs said they will change to operating entirely online if they reopen.
  • SMBs are now 18% more likely to say they will invest in their businesses. Minority SMBs specifically have an interest in investing by upgrading technology. Additional changes SMBs plan to make include, improving their website, accepting more payments from apps, and conducting more business online.

In-Person Payments

  1. The needs of small businesses have shifted as we enter a new phase of recovery.
  • Compared to the average SMB, minority small businesses are more likely to predict needing government aid to keep their businesses running, particularly to cover payroll. Over one-third of currently closed SMBs anticipate needing government aid to reopen their business, and nearly 50% reported that they would use some of the aid to upgrade their online selling capabilities.
  • Small businesses are increasingly interested in assistance that would further their online capabilities, including help with online marketing, connectivity, online payments, and logistics.
  • Fewer small businesses applied for support via the Paycheck Protection Program in 2021. Three in four of those that did not apply didn’t think their business would qualify and receive funds.

In-Person Payments

While it is encouraging that small business optimism is growing and that businesses are increasingly digitizing to meet changing consumer demands, there continue to be areas where the small business community needs our support. In 2020, we saw how public-private partnership, through things like the Paycheck Protection Program, was critical in mitigating the negative effects of the pandemic and getting capital out to the businesses that needed it quickly. We also saw how partnership across the private sector, to remove or reduce fees and democratize access to new products and services for small businesses for example, helped support these businesses as they faced unprecedented challenges.

It’s clear that continued partnership will be crucial to support entrepreneurs, rebuild the small businesses sector and move toward an inclusive recovery.

You can view the full findings of the PayPal Small Business Confidence Index by Morning Consult here.

 

 

1The PayPal Small Business Index by Morning Consult is made up of an average of the net scores from the following questions:

  1. In the next 3 months, do you expect your business to make more or less money than it did in the past 3 months?
  2. In the next 12 months, do you expect your business to make more or less money than it did in the past 12 months?
  3. How likely are you to invest more resources (e.g., money, time) to grow your business in the next 12 months?
  4. Do you think overall economic conditions impacting your business will improve or decline in the next 12 months?
  5. Do you think overall economic conditions impacting your business will improve or decline in the next 3 years?

2 Data for the survey was fielded in April 2021. To accurately reflect the voices of diverse small businesses across America, the survey sample of 500 small businesses was weighted according to the US Census distribution of SMBs across gender, ethnicity, and size of business.

3 Reading this data: Morning Consult asks five questions to small businesses in order to gauge their sentiment. The results from those five questions are then inputted into indices to represent the level of confidence about the future. They are not scored out of 100; higher numbers indicate greater confidence.

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