In the aftermath of the COVID-19 pandemic, small businesses can look to economic indicators to help guide their planning and decision making.
Economic studies are indicating that with the health crisis beginning to subside in the United States, small businesses are reporting strong growth. According to responses in a recent Small Business Recovery Report, the average monthly revenue grew 77 percent in the past six months, from $47,900 in July 2021 to $84,935 in February 2022.
While that data primarily represents larger small businesses, the smallest ones – with fewer than 20 employees – said they saw a 13 percent increase in average monthly revenue and a 12 percent increase in average monthly profits from July 2021 to February 2022.
News of increases in monthly profits in the last year is an encouragement to be sure, but with the wealth of data tracked by federal, state and local governments, and industry and trade associations, can small business owners find useful information to help them navigate these “unprecedented times”? The answer is a resounding “yes”. Among several statistics to consider, financial experts say, are state and local employment data and home-building information.
Data like housing starts or unemployment are economic indicators. Analysts use indicators like these to evaluate investment possibilities. This kind of information can also be quite useful for small business owners, as it’s readily available and has broader implications, unlike some reports on a specific product. Government-published data, while generally less applicable to a particular industry sector, has the virtue of being free, as opposed to industry reports available by subscription only.
Today, inflation concerns are dominating the economy and as the cost of supplies and raw materials increase, small business owners are adjusting their prices accordingly, typically by an average of 21 percent. Economic reports show vendors increasing prices approximately 54 percent and the cost of raw materials increasing some 45 percent. Sixty-five percent of businesses said they intend to keep their prices up for the next six months. Another 18 percent said their price hikes will go even higher. Many owners – 53 percent – reported that they expect supply chain problems to continue beyond the spring and summer, another significant factor in driving up prices. If your business is in any way connected with the housing market, this type of data is essential for you to consider.
Employment is also weighing on small business owners. With record low unemployment, just 3.8 percent, according to the latest reports, the smallest small business owners said they are not hiring. However, the story is different for medium and larger small businesses. Fifty-nine percent of those owners said hiring now is as hard, if not more so, than it was at the end of 2021.
Central to your business’s health during these volatile economic times is to make sound decisions based on information that is reliable and valuable to your situation. Think about how broader economic indicators can have specific impact on businesses like yours. For advice on what economic indicators you should watch, contact your advisor at Diamond & Associates. We’re experts at numbers and can help you identify and track your business’s Key Performance Indicators (KPIs) – those indicators that best track your progress towards your business goals.