Election years often bring heightened uncertainty for business owners, who must navigate potential policy shifts that could significantly impact their operations. KeyBank’s Fall 2024 Small Business Flash Poll found that more than three in five (61%) small business owners polled plan to delay making major business decisions until after election results come out, underscoring the significant impact the political environment can have on business strategy.
As the political landscape evolves, many are anticipating new regulations, tax changes, and trade policies that could impact their business futures. Nearly half (45%) of small business owners surveyed anticipate changes in taxation will have the most significant impact on their businesses — up from 38% in KeyBank’s March 2024 Small Business Survey — with further concerns about the regulatory environment (34%) and trade policies (31%).
Despite these concerns, small business owners remain resilient, adjusting their business strategies to navigate potential policy shifts that could impact their operations. The most common strategies include increasing cash reserves (38%), delaying major investments or expansions (36%), and diversifying product or service offerings (31%). As one of the top indicators of the greater economic environment in the U.S., business owners’ financial resilience could signal improving economic conditions while financial challenges persist.
“The upcoming election adds uncertainty to an already volatile economic landscape; yet, small business owners continue to demonstrate exceptional adaptability,” Mike Walters, president of business banking at KeyBank, said. “Their strategic approach to navigating inflation pressures, managing cash flow challenges and addressing evolving market demands showcases a robust entrepreneurial spirit. This resilience not only positions them to withstand current market fluctuations, but also persevere through potential policy shifts, regardless of election outcomes.”
High Interest Rates Lead to Increased Challenges
Small business owners say they have faced reduced profit margins (38%), increased borrowing costs (37%), and deferred capital investment (31%) due to high interest rates. The survey also found that small business owners are anticipating a rate cut, with more than half (56%) expecting interest rate changes to positively impact their business in the next 12 months. For now, small businesses are adapting to interest rates by increasing cash reserves (43%), reducing reliance on debt (36%), and diversifying funding sources (32%).
Despite steadily high interest rates, actions small business owners are taking now to adjust may be leading to increased confidence and stability. Roughly three in four small business owner respondents (72%) are confident that they could fund their operating expenses for a month, up from 64% in March, just six months prior. Another sign of stability, the majority of small business owners (75%) do not foresee hiring cuts over the next year. In fact, one in three (32%) small business owners expect to grow their staff in the next 12 months.
Fraud Prevention Remains a Priority for Business Owners
As business operations are becoming increasingly digitalized, small business owners continue to express concerns about payment fraud, identity theft and phishing and email scams. Payment fraud (49%) and identity theft (29%) continue to be top fraud concerns, aligning with data from the March 2024 Small Business Survey (44% and 37%, respectively). These ongoing concerns highlight the need for vigilance and effective fraud prevention strategies to protect business operations.
Implementing effective measures against fraud presents significant challenges for business owners. The primary obstacles include the high cost of implementation (47%), a lack of technical expertise (42%), and time constraints (39%), underscoring the complexities and resources necessary to establish robust fraud prevention systems.
Women Business Owners Taking Proactive Measures Amid Economic Uncertainty
While overall financial confidence has risen since March, women business owners are generally more uncertain than male business owners about navigating economic challenges and potential policy changes. A quarter (23%) of women are unsure about their ability to cover operating expenses for a month, compared to 15% of their male business owners.
Despite facing unique challenges, women business owners are demonstrating resilience and adaptability in navigating economic shifts. While 41% of women business owners expect interest rate changes to positively impact their businesses in the next 12 months (compared to 67% of their male counterparts), they are taking strategic steps to safeguard their operations. Notably, women are more likely to adjust pricing strategies (27%) in response to heightened uncertainty, underscoring a focus on optimizing financial outcomes, while men are more inclined to diversify their offerings (35%).
