AI's Growing Impact on Small Businesses
Artificial Intelligence (AI) is reshaping the business world, changing how companies of all sizes operate. While big tech hubs and large enterprises were quick to adopt AI, smaller businesses are now catching up. Main Street businesses are increasingly turning to AI to streamline operations and looking for new ways to use this technology as it becomes faster and more widespread.
Small Businesses Warming Up to Artificial Intelligence
BizBuySell's quarterly Insight Report, a nationally recognized economic indicator that tracks the health of the U.S. small business economy, has been monitoring AI adoption among small businesses. In 2023, only 26.40% of business owners reported using AI tools. However, the most recent survey in Q1 2024 reveals a shift, with 35.10% of small business owners now integrating AI into their operations - an increase of over 10 percentage points in just one year. While this growth is promising, there remains room for expansion, as 64.90% of business owners have not yet incorporated AI into their operations.
Small businesses are warming up to AI, highlighting a shift in technology use. A recent MIT Sloan study found that overall business adoption of AI remains relatively low. In 2017, only 6% of companies reported using AI, and a November 2023 Census Bureau survey showed that fewer than 4% of companies use AI. The MIT study also revealed that AI adoption is highest among large companies, with over 50% of firms with more than 5,000 employees using AI. Adoption rates vary by sector, with manufacturing, information services, and healthcare leading at around 12%, compared to 4% in construction and retail. These findings underscore the potential for growth in AI adoption, particularly among small and medium-sized businesses.
How Main Street Businesses Are Putting AI to Work
Small businesses are leveraging AI across a variety of functions, with 69.63% of small business owners reporting they use artificial intelligence to assist with marketing efforts, such as creating targeted campaigns and generating content. Analytics follows at 37.54%, enabling businesses to gain deeper insights from their data. Customer service functions, including AI-powered chatbots and virtual assistants, are used by 28.37% of respondents.
The good news? Nearly 72% of business owners say AI is improving their performance. This suggests that AI is delivering benefits and potentially boosting efficiency, cutting costs, and enhancing customer experiences.
Looking Ahead
As AI technology continues to evolve, new possibilities are emerging for small businesses. Advancements in machine learning, natural language processing, and process automation are set to further revolutionize business operations. For business buyers and sellers, the integration of AI is becoming an important factor in valuation. As automation becomes more prevalent, businesses that effectively incorporate AI may see improved value and higher sale prices in the marketplace.
While AI offers exciting opportunities, small business owners are approaching adoption with a balanced perspective. Excitement for the emerging technology is tempered by exercising caution regarding data privacy and accuracy, especially in the early stages of AI use.
The AI landscape is evolving rapidly, and small businesses that stay informed and adaptable will be best positioned to harness its potential. Moving forward, the question for many small business owners will shift from whether to adopt AI to how best to implement it for maximum benefit.