When Jamahl and Natalie Grace launched Grace+Love Candle Co. in 2020, they had no idea what the future would hold. “If 2020 is the year everything changed…” said Natalie, “…then 2021 is the year that everything keeps changing,” Jamahl said, completing her thought.
In 2020, as the COVID-19 pandemic shut down businesses around the world, thousands of people turned to their side gigs for extra income. Businesses that primarily operated from brick and mortar locations fled online to keep afloat. And consumers everywhere adapted to new ways of shopping and supporting local companies.
Fast-forward to 2021: the year of growth and recovery. In 2021, small businesses began to bounce back—some even better than before. Millions more entrepreneurs filed for new business licenses, making 2021 a record year of new business growth. And online and omnichannel businesses saw higher than expected revenues as a result of the ecommerce boom.
But, despite all this, small businesses across industries continued to face real challenges in the form of labor shortages, inflation, and low cash flow. As yet another strange year comes to a close, small business owners share what they’ve learned in 2021—and how business owners everywhere can prepare for an even stronger 2022.
Check out the QuickBooks “Year in Small Business 2021” hub to learn more.
1. Finding skilled workers is a challenge
“One of our biggest challenges this year was labor shortage,” said Lorena Camargo, owner of PearlTrans Logistics in California. And she’s not alone. Nearly 1 in 2 business owners say it’s hard to find skilled workers. Another 2 in 5 say it’s hard to retain the skilled workers they already have. To combat this, some business owners are revamping their benefits packages, hiring younger workers, and relaxing their experience requirements. Many say they’ve already increased pay, and 44% still plan to do so.
2. Inflation causes cash flow problems
“The rising costs of supplies I think is a problem for the world,” said John Waddy, owner of Kentish Soap Co. And it’s safe to say that business owners everywhere would agree. Nearly all small business owners (more than 9 in 10) are worried about inflation, including the cost of materials, equipment, and labor. For some, these challenges have already resulted in cash flow problems. In response, nearly 3 in 5 small businesses say they raised their prices in 2021—and 63% say they have plans to do so in the future.
3. Low cash reserves pose a risk
If we learned anything from 2020, it’s the importance of a rainy day fund, or emergency cash reserve, for small businesses (and everyone, really). And despite a return to pre-pandemic numbers, many small businesses still say they have less than six months’ cash reserves. Nearly 1 in 4 say they have less than one month. The most vulnerable businesses are the smallest of the small—those with less than $50,000 in annual revenue.
4. Despite challenges, small businesses bounced back
“I truly believe 2021 was an opportunity to reset,” said Mariette Martinez of Master Your Books, “to show resilience and see that in one another.” Resilience is right—nationally, small business monthly revenues consistently beat pre-pandemic benchmarks throughout 2021. Even the hardest hit industries like bars and restaurants, retail stores, and hair salons saw a return to pre-pandemic levels and then some. But some industries, like travel and theater, continue to struggle.
5. New businesses are on the rise
More than 3 million new business applications were filed during the first half of 2021 alone—setting a record year for new business growth, despite challenges. And wishful entrepreneurs everywhere are taking note. Almost 3 in 5 U.S. employees say they want to start their own business—and 20% plan to take the leap in 2022. This is equivalent to around 17 million people, “and that is likely to translate into another record year of new business growth,” said Simon Worsfold, a QuickBooks data analyst.
6. Online sales are essential for success
It’s no secret that online businesses performed better in 2021. More than 70% of small businesses that sell online projected growth in 2021 (compared to only 58% of businesses that don’t sell online). Consumers have adapted to the convenience and safety of online shopping, and they’ll be hard-pressed to return to stores even once the pandemic restrictions have been lifted. With this in mind, nearly half of small business owners say increasing online sales is a growth priority for 2022.
7. Remote work… works
If we’re seeking silver linings, the pandemic had a strange way of bringing teams together while keeping them apart. Almost half of small businesses say they had remote workers in 2021, and they expect their remote teams to continue to grow. In fact, 27% say they plan to expand their remote work options as part of their strategy to tackle hiring challenges.
8. Environmental sustainability is a rising tide
Almost 9 in 10 small businesses agree that environmental sustainability is important to the future of the economy. In fact, 44% say it’s critically important. Small businesses represent 90% of businesses globally and have a critical role to play in combating the negative impacts of climate change. Plus, studies show that consumers care about supporting businesses that care about the environment.
More insights in the QuickBooks 20221 hub
Visit the QuickBooks “Year in Small Business 20221” hub for more data insights, small business inspiration and advice for new entrepreneurs, and tips for running a successful small business in 2022 and beyond.
This post first appeared on QuckBooks Blog