The 2023 Intuit QuickBooks Small Business Index Annual Report has been released by Intuit (NASDAQ: INTU), a leading provider of financial technology and maker of Intuit TurboTax, Credit Karma, QuickBooks, and Mailchimp. The paper, which was created in partnership with eminent global economist Professor Ufuk Akcigit and his co-authors, demonstrates how small firms’ capacity to generate employment and obtain the capital they require to expand is being impacted by macroeconomic factors like inflation and increasing interest rates.
While overall job levels in the US, Canada, and UK have been trending higher in 2023, the analysis indicates that small business employment has been less resilient. The report looks at how small businesses are coping with these challenges and explores the connections between small business growth, access to capital, and use of digital technology using anonymized data from more than 3.4 million Intuit QuickBooks customers and surveys of more than 5,000 small businesses in the US, Canada, and the UK. Major conclusions include:
Small businesses have become more reliant on their credit cards as a result of high interest rates and heightened inflation, with current spending being, on average, 20% greater than it was before to the epidemic. Their interest-inclusive monthly credit card payments have increased by an average of 26% at the same time.
Jobs are being impacted by these pressures as small business employment rates decreased in the US and Canada in seven out of the first eight months of 2023. Similar to the US, the UK had a fall in small company job vacancy growth rates over the first eight months of 2023.
The rise of solopreneurs (non-employer businesses) demonstrates that entrepreneurship is stronger than ever; however, fewer new businesses are creating jobs in the US and Canada, a worrying trend given that in the US, small businesses account for more than a third of all jobs while in Canada and the UK, they account for more than two in five.
The ability to obtain money is crucial for the expansion of small firms, yet in the US, Canada, and the UK, about half of them are self-funded by the proprietor. Businesses that are new, run by women, or by people from underrepresented racial or ethnic groups frequently have more difficulty obtaining capital.
The current climate of excessive inflation is of utmost concern to small business owners. Interest rates have risen to previously unheard-of levels, making the situation more difficult. Due to these unfavourable circumstances, business owners have been forced to use their resources and rely more heavily on credit cards than ever before, with monthly credit card expenditure increasing by an average of 20% from pre-pandemic levels. This adds up to thousands of dollars extra each month in fees when combined with the higher interest payments on these debts. As a result, these changes are having a negative impact on the growth of small businesses.
It takes courage to decide to start your own business. Policymakers and industry leaders should be similarly bold in fostering an environment that supports the expansion and success of small firms, given the tremendous impact that new and expanding small enterprises have on innovation, job creation, and the economy. We are still committed to collaborating with other businesses in the sector to develop fresh, cutting-edge approaches to serving our clients and addressing their most pressing problems.
As a macroeconomist, Akcigit’s research focuses on business dynamics, entrepreneurship, technological innovation, and economic growth. His work has frequently appeared in prestigious economics publications, been referenced in various policy studies, and been covered by the general public. The National Science Foundation, among many other organisations, has honoured the merits of Akcigit’s research with the CAREER Grant (one of the NSF’s most prestigious prizes supporting early-career faculty), the Kaufmann Foundation’s Junior Faculty Grant, and the Kiel Institute Excellence Award. 2019 saw the announcement of the Max Plank-