Ushering in the Second Half of 2023: Key Insights for SMBs

Michael Mendenhall: Hello, I'm Michael Mendenhall and I'm thrilled to be here with you today, celebrating the small business administration's National Small Business Week 2023, discussing what's ahead for small businesses for the remainder of the year. I'm here with Burton Goldfield, president and CEO of TriNet. Welcome Burton.

Burton Goldfield: Thank you so much, Michael. It's great to be here.

Michael: Well, change seems to be constant, certainly over the last several years for small businesses. One that was most recent has become a financial crisis for many, many companies. What do you see as the outcome from this financial crisis? I mean, is this over or is this something that's going to continue, and how has this affected small businesses?

Burton: Well, first and foremost, small businesses in America are very resilient and they are used to change. Admittedly, the last two years have been unprecedented with COVID, the PPP loans, and now the issues with the regional banks. But from my vantage point, they are thriving and growing and building their business in spite of this economy.

Michael: Were they affected by the banking crisis, any of the small businesses and/or your customers?

Burton: Many small businesses have been affected and continue to be affected. They use the regional banking system in their local towns and they help to get those businesses off the ground. So certainly it has an impact, but what I am seeing is the companies are resilient, they're finding other banking relationships. And from a TiNet standpoint, we were able to make sure that the payroll was made for 100% of the companies and 100% of their employees.

Michael: Well that's awesome, but what caused it? I mean, what do you think? There are many scenarios here that have been played out. What caused the crisis?

Burton: Well, the key is that this crisis and crises of the future are not anticipated. So whether it was the interest rates, the regulations, the approach that a particular bank was taking is less relevant than how these companies react and more importantly how their partners and other banks reacted to make sure that they could get through this crisis.

Michael: Do you think the banking crisis is over?

Burton: I think that the initial shock of the banking crisis is over, but we will all be looking at the access to capital for small businesses over the next few years.

Michael: What do you think small businesses should be looking at moving forward so they're prepared for something like this? You were saying that it wasn't anticipated. These crises do come about pretty instantly like COVID, like the banking crisis. How should a small business be prepared?

Burton: Resiliency comes in many forms. You need alternative banking sources, alternative bank accounts, you need a customer base that's broad and with reach across the entire country, or in fact across the world. But what you will see is that different financial crises affect different businesses and different markets. So the broader you reach, the more resiliency you have from an access to capital standpoint, the better you are able to survive.

Michael: Do you think velocity and agility then really matter for these small businesses, and when we say change is constant, you have to adapt very quickly, is that important for small businesses?

Burton: So resiliency and velocity have to do with people, processes and systems. And you have to have great people because they have to be able to react quickly and not wait for direction. Processes have to include ways of accessing different ways to get capital or to alternate between different banks. And systems are about having the backup systems so that when a problem comes, whether it has to do with security issues, whether it has to do with banking issues, whether it has to do with access to a particular market either here or overseas, you have alternatives.

Michael: Well, let's take this now to the broader macroeconomy. We're seeing so many different signs. People are concerned, uncertain I guess is what I would say, about the economy. I mean, you've seen jobs being created above and beyond what was projected from the U.S. Department of Labor, yet you're seeing raising interest rates and capital becoming more expensive. Where do you see the economy moving in the latter part of this year? Where should small businesses be concerned?

Burton: So the headlines have been about the enterprise, the layoff of hundreds of thousands of workers over the last couple of months and potentially continuing. We are not seeing that same trend in the small business marketplace. We've done a study of our customers and it was very bifurcated. Companies that were larger than 100 were finding that they were either slowing down or not hiring at all. And the smaller businesses between 25 and 100 were optimistic about continued hiring. That doesn't mean in every single case people will hire. What I'm saying is, on the aggregate, we expect hiring to continue albeit at a slower pace.

Michael: Let's talk about the technology sector. That's where you talked about tens of thousands have been laid off and there's been a lot of noise around that. Was that mainly enterprise in technology that are laying off and that gets a lot of the noise, or is it really across the board that technology is being corrected as an industry?

Burton: So if we could speak frankly, the smaller tech companies have been thrilled to get access to some of the employees that were at the larger companies. So over the last couple years, there has been a demand for great workers. And what I'm finding is, the tech companies that are well funded are still growing and they're taking talent they've been looking for the last two years as the bigger companies layoff people.

Michael: So we were talking about talent coming from these big enterprise companies that are laying off and that small businesses are excited about that because they're having access to great talent. We know retention becomes really important as well. So as you think about this idea of talent, you also have to look at your work environment. And now we have over 60% of small businesses that are remote or hybrid, very new environment. How does that affect the work environment and productivity?

Burton: It's a big issue which will continue for many years to come. So the positive side is you can attract people from all over the country and all over the globe, but how do you get them connected to your business? How do you get them connected to your mission? You now have people with expertise, whether it's job expertise, whether it's expertise in certain aspects of communication, they need to gel as a team. So having the right culture, which is tied to communication, which is tied to leadership and is frankly tied to the mission. And what I'm seeing is that companies that have a strong mission, particularly small and medium-size businesses, are able to be more cohesive in the work that they're doing and most importantly in the result that they're getting.

Michael: So they also now can access talent globally if they want, right,-

Burton: Absolutely.

Michael: ... with remote work? So when you think about that, doesn't this become more complicated for small businesses? Now I may have somebody that was single state or employed in a central location and now I may have them in multi-state. What are the complications for small businesses in regards to this idea of remote and employees from really anywhere?

Burton: The complications are significant. So access to medical benefits, the ability to properly pay taxes, the work environment itself, the hours that are being worked, the local labor laws all have to be followed. And what I'm finding is, most small businesses really want to do it right. They want to do it right by their company, but most important, right by each and every employee. So they turn to services like TriNet and there's a lot of companies out there trying to help these businesses, not only once they get the talent, but be compliant for all other people across the country.

Michael: So awesome. So now you're remote, you talk to culture and mission. How important is culture to the success of a small business?

Burton: I think it's everything because the idea of putting all the wood behind one arrow and having a very clear set of goals delivers better results. So culture is not a soft concept. Culture is the ability to unify a group of people behind a core mission and deliver results because in the end, every small business knows that results matter.

Michael: So when you think about culture and mission and you have a clear one as a small business for your company, think about your employee base at this point and their satisfaction. How important is employee satisfaction to customer experience because the two are so tied and many companies focus on the experience and they focus on the software piece? How important is employee satisfaction to your customer service?

Burton: Employees today have a set of expectations that include great benefits, great leadership and a mission-driven company. Most great employees want all three of those. Without that, you may be able to attract them today because of the state of the market, but you're not going to keep them long term. And I believe having a cohesive set of colleagues is a very important part of delivering the result time after time. So turnover matters. In most companies, having less turnover, having a core group of people that are focused will deliver the result because problems are complex, they don't get solved in three months or six months. What's going to change in the economy next year? I don't know, but I promise you it'll be different than it is today. So having the right culture, having employees that are engaged with the right benefits, with right tools so they can be efficient and motivated to do that great job is an important part of small business in America.

Michael: So it does relate to customer experience-

Burton: Absolutely.

Michael: ... the satisfaction of your employee base? How important is that to your overall success though as a company because many people have disengaged employees? In fact, 65%, a study was done, are disengaged. 65% of the workforce. So how do you keep that idea of being engaged? And is it a part of taking ownership in the company? And when I say ownership, I don't mean equity ownership, I'm talking about owning the idea, owning the mission.

Burton: I don't believe you create the culture. I believe the culture is an amalgam of each individual that you add to the company and how people are treated and what they do and what's expected of them and the leadership of the company. So this is not something you change overnight if you happen to have a disengaged group of people. Having the right feedback loops, we do surveys all the time, I read every comment and every survey. Why? Because I want to know what people are thinking. Once I can internalize those perspectives, I can decide where to move the company to be better aligned with the people that are in it. You need alignment between the colleagues in the company and the mission of the company. If it's not there, I believe it's really, really hard to deliver an exceptional result. And most small businesses are looking for an exceptional result. You don't get into running a company just to do a mediocre job or be a me-too company. Big vision, big mission, connected employees.

Michael: Burton, so you talked about benefits. How important are benefits to your employee base to retention? And what has changed? What have you seen change in the last three years to benefits being offered to employees?

Burton: So there's been many surveys and benefits comes up at the top of the list. It is clear that access to medical care is really important and really expensive. So what are companies doing there? They're giving choice, they're paying a large percentage of the costs and they're giving them flexibility. With the other parts of benefits, flexibility is key. How do you handle time off? How do you handle ancillary benefits, whether it be access to other types of healthcare and mental healthcare? How are you handling approaches to women's health issues? Everybody is asking these questions. Frankly, when I was growing up, you took the benefits the companies gave, you thanked them very much and you moved on. Today, people are much more educated, which is important. And by the way, they're educated because a lot of them are coming from larger companies that have a broad range of flexible benefits. They want that in the small businesses, which before were never offered.

Michael: Have you seen employees not take a job based on benefits?

Burton: We have seen people decline jobs based on benefits. And also interesting, even in this tight economy, we're seeing more people adopt benefits than they were two years ago. So think about that for a minute. It's a very important part of the equation.

Michael: That's awesome. This is also a part of a company's empathy. We talk about culture mission and there are a lot of articles that are out there now saying businesses lack empathy. How important is empathy relative to running a small business?

Burton: So I don't think businesses have empathy. I think humans have empathy and each person needs to be met where they are, in their life, in their particular situation. The issue is, do you have leadership that understands the people that are part of the organization? The issue is that no two people are the same so you need to get to understand each of the people in your organization or under your leadership, what they care about and how you're going to address those issues. If there was a textbook or a checklist to building a great company, if there was a textbook or checklist for how to have empathy, everybody would do it. Again, you have to connect people. The connection needs to be the mission. Empathy is about people, it's not about companies.

Michael: So we talk about optimism and that you mentioned earlier, these small businesses seem to be optimistic about the future. In light of what we see in the news sometimes about the economy, geopolitical, where do you find yourself and where do you find small businesses in terms of what it looks like in the future? And are they optimistic?

Burton: So they are optimistic and that makes me optimistic. I am optimistic because I talk to business owners every single day. I'm optimistic because I've seen, over the last 15 years as CEO of TriNet, companies go through unimaginable things and they grow and thrive. Some of the best companies in the world were started during financial crises. I started in 2008, right before the great financial crisis. We grew through 2009. We helped companies survive, we helped companies grow. We're going through the last two years, which are obviously unprecedented. It helps build the bond between colleagues, their company and companies like TriNet that are there to help. You do not find out about people or organizations or frankly partnerships until difficult times come. And at the end of the day, it is an important part of evolving a company in a changing world.

Michael: Isn't it also about customers and their importance in that equation? So what do small businesses do relative to we're now in this environment, we're somewhat optimistic? Are you really trying to solve the customer's problems very quickly, in a very agile market that's moving faster than we've ever seen?

Burton: So speed is really important, and building organizations for speed, flexibility and the ability to pivot is a key part of being a small business. And what we're seeing is that companies that are able to pivot are still able to get access to capital, are still able to grow and still able to address the passion that they have. The key is having partners like TriNet and others that are focused on the things that are non-core to their business because if you are pursuing a new pharmaceutical or you are pursuing a new AI tool for the marketplace, you probably are not as focused on benefits and access to other aspects of what employees need in multiple states, taxes, et cetera.

Michael: Burton, you talked about capital and capital's available. The SMBs said basically, there's 2 trillion of liquid [inaudible 00:18:29] there, sitting there for companies. Are you seeing that for small businesses?

Burton: I think it's harder to get capital today. The interest rates are higher. What that means is the hurdle rate or the value proposition needs to be stronger. So the answer is, for some companies, they're not going to get funded. For other companies, they are going to get funded and they're going to have to raise the bar in terms of time to market, in terms of growth rates in order to meet that hurdle. I don't think that's a problem, Michael. I think that it's an opportunity.

Michael: Well that's awesome. So if I were to say for all these small businesses that are watching, one remaining statement from you on what you want to say to them, and what would you say as the CEO of a company that has 26,000 of them as customers?

Burton: I would say stay focused, believe in yourself, believe in your mission and execute your plan.

Michael: That's awesome. Thank you, Burton, for being here with us. It was enjoyable and certainly insightful.

Burton: Thank you.