Bredin Report: What Expenses Keep SMBs Up at Night?

The Most Challenging SMB Expenses

Each month, Bredin surveys 500 principals of U.S. SMBs in our shared-client survey the SMB Pulse. This month, we asked SMBs to rate how challenging each of the various costs of running a business are. There are some important insights for your sales and marketing to this high-potential segment.

Costs are a pressing concern

For context, managing costs is the second-biggest business challenge for SMBs with fewer than 20 employees, after finding new customers. Managing costs is also:

  • The second-biggest challenge for SMBs run by women, and by Gen Xers
  • The third-biggest challenge for SMBs in Retail/Wholesale and Manufacturing
  • The fifth-biggest challenge for SMBs with 20-99 employees
  • The eighth-biggest challenge for SMBs with 100-500 employees

The most challenging expense is…

Healthcare, for SMBs with fewer than 100 employees. It’s the second-most challenging expense for SMBs with 100-500 employees, after interest expenses. Healthcare is also the most challenging expense for SMBs over two years old, in every industry group, and across all generations.

If you can help SMBs manage healthcare expenses, either via your offerings or by providing tips and advice (to the degree that it is relevant to your brand), you can go a long way to enhancing your relationship with them.

Very small business (VSB) expense challenges

The second-most challenging expense for SMBs with fewer than 20 employees is advertising and marketing. This is consistent with their number one overall business challenge, which is new customer acquisition. It may reflect the increasing costs of search (among other media); the costs of martech such as CRM, email marketing and SFA; and the costs of marketing staff. VSBs are very receptive to your help, either with offerings or advice, to decrease the cost of customer acquisition and retention.

VSBs are also challenged by insurance and taxes. If you’re in financial services, providing expense management advice in these areas is a great way to boost loyalty.

Small business (SB) expense challenges: taxes, CapEx, tech

For SMBs with 20-99 employees, taxes are the second-biggest challenge, followed by capital expenditures such as buildings, vehicles and equipment. SBs’ emphasis on CapEx is good news, in that business investment indicates optimism. It’s also good news for banks, alternative lenders and credit card issuers, who have a terrific opportunity to educate SBs on the business, tax and cash flow benefits of financing capital investments.

Technology, which we defined as ‘hardware, software, Internet access etc.’ is a very broad area, and can cross over into marketing, CapEx, and other expense categories. If you provide technology solutions, demonstrating payback – for example via a worksheet or calculator – will help close the sale.

Mid-sized businesses (MBs): interest rising

The most challenging expense for SMBs with 100-500 employees is interest, which indicates that they are taking on debt to fuel business growth. If you provide credit, helping MBs understand the right amount of debt relative to their cash flow or assets is a great way to build or enhance your relationship. Two in five MBs rate paying down debt a significant challenge, so ensuring they are managing their expenses well is another great way to build trust.

Expense challenges by industry

We roll Pulse respondents up into four broad industry groups: Professional Services, Retail / Wholesale, Manufacturing, and Other (which is mostly personal services). While the number one expense challenge in every industry is healthcare, the order varies significantly by industry after that. The more you can tailor your messaging to the concerns of specific industries – which is how SMBs self-identify – the more your messaging will resonate.

Expense challenges by generation

Although generations are at best a gross overgeneralization as a way to assess differences among SMBs, they are still interesting because of the often stark differences by the age of the principal. For example, while healthcare is the biggest expense challenge regardless of age, the second- and third-biggest challenges vary widely:

  • Gen Z and Millennial entrepreneurs: advertising and marketing, followed by interest
  • Gen Xers: insurance, followed by paying down debt
  • Boomers: taxes and fees, followed by advertising and marketing

Want to learn more? Get the full list of SMB expense challenges, by company size, respondent age, industry group, growth outlook and more.

About Bredin

Bredin was founded in 1991 by America's foremost small business expert, author and syndicated columnist Alice Bredin. From its beginning, Bredin was designed to be a breed apart: 50% research consultancy, 50% creative agency, 100% focused on SMB. Based in Somerville, Mass., Bredin helps Fortune 500 companies understand, reach and retain SMB customers through timely, targeted research and award-winning marketing programs.