On the heels of a turbulent year that delivered a global pandemic and widespread social unrest, small businesses in the U.S. set their sights on persevering and overcoming in 2021.

With 66 percent of all small businesses reporting negative impacts from the COVID-19 crisis, the fallout from the pandemic has been far-reaching and long-lasting. As small businesses make up more than 99 percent of all businesses operating in the U.S., it’s no surprise that the pandemic swiftly and noticeably altered the business landscape as a whole.

We set out to take the pulse of small businesses as they survive — and even thrive — in the wake of a global crisis. In 2021, we surveyed hundreds of Incfile customers, all small business owners across a variety of industries. Here, we’ll break down our most meaningful survey results, and highlight emerging trends in post-pandemic small business recovery.

Key Insights

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Q1 Survey Findings

Digitization is a critical focus for many businesses impacted by the pandemic. Our Q1 2021 survey results showed that 40 percent of small businesses made the leap to digital solutions as a result of COVID-19, while 45 percent said they were ready for a digital transformation.
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Q2 Survey Findings

66 percent of small businesses reported a loss in 2020. Our survey numbers align precisely with the national average, as reported in our Q2 2021 survey.
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Q3 Survey Findings

The shift to remote work impacted small businesses in many ways, with nearly half saying they plan to make working from home a permanent solution. However, our Q3 2021 survey revealed that a majority of small businesses did not need to or had already adapted to remote work. A slim 7 percent said they tried and failed to make the change.
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Q4 Survey Findings

On the whole, 2021 presented unique challenges for small business owners, as evidenced in our Q4 2021 survey. While 66 percent reported increased costs, another 70 percent said they were negatively impacted by supply chain disruptions, and over half felt the sting of a nationwide labor shortage.

In the midst of hardships and struggle, small business owners are making
strides in rebuilding their businesses and preparing for future downturns
and unexpected events.

Where DIY and Digital Meet

Digital transformation is top of mind for most small business owners, but never so acutely as in the midst of a pandemic and a sudden shift to remote work.

Our survey revealed that many business owners have a DIY mindset, but they also know when they need expert advice and support.

Survey Report

Only 60 percent of small business owners formed a legal business entity before beginning business operations. More than half handle their business’s digital operations on their own.

Learning curve and cost are the two biggest barriers to digital adoption.

Hurdles Busines Owners Face in Adopting Digital Technology
Small Business Owners Believe That Digital Innovation Means

There is some confusion among business owners around the meaning of “digital innovation.” For most, they believe it means the adoption of the latest tools on the market.

When in need of guidance and feedback, most entrepreneurs seek out other entrepreneurs.

Group 790

Financial Recovery and Resilience

The impact of COVID-19 was felt by small businesses throughout 2021, with businesses reporting the hardest hit to their sales.

Budgets got tighter as bottom lines got slimmer, but all that belt-tightening helped many small business owners uncover key changes for their continued survival.

COVID-19 Impacted Small Businesses in Numerous Ways

Small businesses said their sales suffered the most, followed by demand, production and labor.

While loss was a common theme, so too was growth. Thirty-four percent of small businesses reported actually growing their revenue in the wake of the pandemic.

66% of Small Businesses Suffered a Loss in 2020
Cash Flow Is an Important Indicatior of Business Health in 2021

In spite of some positive outcomes, only 12 percent of small businesses felt they had enough money in the bank to ride out another unexpected crisis. However, many are ready to make a change.

Many small businesses shifted their focus as they emerged from the pandemic, with 36 percent placing more emphasis on financial planning and 35 percent renewing their focus on records and accounting.

66% of Small Businesses Suffered a Loss
COVID-19 Impacted Small Businesses in Numerous Ways

In fact, many are planning to change their entire revenue models.

In order to prepare for future economic downturns, some other changes include pivoting their business and adding revenue streams, adjusting prices and boosting employee training and professional development.

The Remote and Hybrid Revolution

It wasn’t actually a revolution for small businesses that had already seen the
shifting tides and began implementing remote work well before COVID-19.
Those who didn’t were quick to adapt and — with a few anticipated hiccups —
made remote work work for them.

43% of Small Businesses Did Not Need to Adapt to Remote Work to Survive

More than half of small businesses did not have to make adjustments to adapt to working from home, either because they were already doing so or had previously implemented a hybrid or WFH model.

For those who did make a change, it seems the remote shift will stick. Close to half said it’s going to be a permanent business model.

Most Small Businesses Are Planning to Make WFH a Permanent Solution
Among Hybrid Workplaces, the Ideal Balance Is More Time at Home

Small business owners are jumping on board the WFH bandwagon, preferring more time at home, even in hybrid operating models.

As for culture, a majority of small businesses feel remote work was a natural fit.

Others aren’t so sure. To make the transition easier, many are relying on a combination of remote (video conferencing) and in-person meet-ups to build relationships and boost morale.

Creating a Culture of Remote Work
When It Comes to Hiring, Downsizing Has Slowed, But So Have Full-Time Positions

There has been a fundamental shift to the way small businesses hire.

While downsizing and layoffs have slowed, new hiring is sluggish. However, many small business owners are expanding their horizons by opening up to hiring global, remote workers.

New Challenges. New Approaches.

The last quarter of 2021 gave small business owners an opportunity to reflect on the impact of the previous two years. While recovering from the height of the pandemic, they also faced new struggles, many of which were also a direct result of the prolonged volatility across the business landscape.

Nearly three-quarters of small businesses have dealt with supply chain disruptions in the last year, with more than a third saying the impact has been significant.

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Nearly three-quarters of small businesses have dealt with supply chain disruptions in the last year, with more than a third saying the impact has been significant.

Operating costs are on the rise due to the lingering effects of COVID-19 and a domino effect that has shaken the nation’s economic stability.

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Over half of small business owners are dealing with the ramifications of an ongoing labor shortage, with nearly a quarter saying it’s a continuing struggle.

The last year has precipitated the shift to digital operations for many businesses, with 52 percent taking their business online for the first time. However, results were mixed across the board.

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Frame 36 (1)

In spite of all of this, there are signs of recovery on the horizon. Twenty percent of businesses are planning for expansion in 2022. To grow, they are looking to boost marketing and trim operations.

About Incfile Surveys

Incfile surveyed its customers preceding each quarter in 2021. In all, each survey received more than 300 unique responses, for a total of more than 1,200 throughout 2021. Business owners spanned a variety of sectors, including health and beauty, finance, pet care, skilled trades, real estate, ecommerce, consulting, and many more. Businesses primarily had fewer than 10 employees. Survey questions were based on crucial issues and challenges facing small business owners throughout the COVID-19 pandemic and their subsequent response and recovery.

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