Optimism Up and Entrepreneurs Out, Compensation Boost, AI Innovation Incentives

Hey, everybody, it's Gene Marks, and welcome to this week's edition of the Paychex THRIVE Week in Review. This is where we take a few items in the news that impacts your small business and mine, and we talk about it just a little bit.

Before we get started, imagine if there were like two of you managing your business. Think about how much more you could achieve? I mean, while that may not be possible right now, there is a way to lighten your workload. That's where Paychex comes in. They've got the tools and expertise to handle the day-to-day essentials from payroll to HR and employee benefits.

So, to see how Paychex can make a difference, head to paychex.com/meetpaychex. That's www.paychex.com forward slash M-E-E-T-P-A-Y-C-H-E-X. You can also find the link in our show notes.

All right, so, let's get to the news. First item of news today comes from an article in Fortune on fortune.com. The 2026 UBS Global Entrepreneur Report found that many business founders are preparing to exit their companies even as they remain optimistic about the future. The survey, which covered entrepreneurs across 26 markets whose businesses collectively generate more than $34 billion in revenue, shows that 69% – sorry 68% – of entrepreneurs expect positive business prospects over the next year.

A striking finding is that 63% of those entrepreneurs say that they plan to exit their businesses at some point often through sales to strategic buyers, private equity firms or family succession.

Despite these plans, founders remain growth oriented. Many expect to expand internationally, hire more workers, and invest heavily in artificial intelligence to improve efficiency and decision-making. The report suggests that demographic factors, such as aging founders, as well as strong valuations or driving exit planning. At the same time, entrepreneurs cite geopolitical uncertainty, trade policy changes, and talent shortages as risks that could complicate their growth strategies.

So, first of all, take this news with a grain of salt. If I am selling my business, of course, I'm going to be saying that things look great and I am optimistic and the prospects are good, right? I mean, we're trying to sell a business here, so we want to build that up. I'm not saying anybody's doing anything wrong, but I would hope that people would be optimistic when they're trying to sell their business or trying to get the biggest valuations that they can.

And yeah, the demographics don't surprise me. I more than half of U.S. small business owners are over the age of 50. It is a … we have an aging demographic in the small business market. And yeah, of course, they're making their exit plans, and that could be selling to family members, private equity firms or what they call investors or strategic buyers. None of that none of that surprises me.

Here's one piece of advice, though; If you are working for a company or if you're looking to start your own business – buy one first. I think once you get some knowledge and some experience under your belt … I mean, you just heard the news, you've got 63% of these business owners want to sell their businesses. You can buy something that's already got a customer base structure, infrastructure, processes, employees in place. It might cost you a lot less than starting something up from scratch.

Then of course, if you buy something in the industry that you're targeting, you can mold it into your own thing over time.

My advice to you is that ... Listen, you know, it's exciting to start up a business from scratch, but buying an existing business gets you way further down the field quicker than starting something up from scratch. So, it's definitely something to consider, and certainly there's a big market out there for it.

The second bit of news comes from BusinessJournalDaily.com. It's a report from the National Federation of Independent Businesses. They have a recent jobs report and it showed that small businesses are increasingly raising employee pay as labor market pressures persist.

According to surveys, this is from February data, 34% of net business owners reported increasing compensation, the highest level since March of 2025, and an increase from the previous month. Another 22% plan to raise wages in the coming three months. That's more than 50% of small businesses already paying or have already increased compensation or are planning to increase compensation within the next few months.

I mean, the big thing that's driving this is just hiring. About one-third of owners report job openings they cannot fill, well above the historical average. More than half of small businesses said they are hiring or trying to hire, yet many report few qualified applicants. The data indicates that labor shortages, particularly for skilled workers, continue to shape compensation decisions among Main Street.

While hiring plans have softened slightly compared with earlier months, the reports suggest the labor market remains tight and competitive, pushing small firms to increase wages in order to attract and retain talent.

If you haven't been looking into this – I've been looking at some HR compensation reports – the typical raises that people will be giving this year will be between 3 and 4 percent, just so you know. So, if you're planning on your raises, that's where they are.

You want to maintain your talent and keep them good. If you can't afford anything more than that, obviously other benefits offering more flexibility, PTO, better health insurance, retirement plans, they're all part of the big package.

Just remember, even though small businesses like yours and mine have a challenge finding good people, it is a good thing to work for a small business. I think way more so than a big company. There was less bureaucracy, less process, more of a feeling of purpose in getting something done and more interaction with the owners that are running the company. That says a lot.

So, you know, consider working for a small business. It’s a good thing, and we should be promoting that, but at the same time, we need to be compensating somewhat competitively, as well. So, we'll see that turns out.

And one final thing, AI is not going to have that impact. Everybody's thinking about AI, you know, replacing employees. You just heard, I mean, a third of small businesses can't find skilled workers, you know, and many others are still looking for good people. I don't think technology is replacing people anytime soon. We can't find the people. So, that's my fault on that.

Okay, finally story, I mentioned AI. This is an AI related story. The big accounting firm KPMG, my alma mater, is now offering cash prizes to boost AI innovation. Now, this is important for smaller businesses because we want to get our employees using AI and coming to us with some ideas. So, here's what KPMG is doing.

They're experimenting with financial incentives to encourage employees to develop new AI applications within their firm. The consulting giant has launched a program called AI Spark Innovation, which offers significant cash prizes to consultants to create AI tools that improve client services or streamline internal operations. The initiative focuses particularly on employees below the director level aiming to unlock grassroots innovation across the organization.

Company leaders say the traditional consulting model centered on billable hours often discourages experimentation. So, the firm hopes monetary awards will motivate staff to invest time in developing AI solutions. Some of the prizes are expected to exceed typical year-end bonuses. This is not a gift card to Starbucks. These people are offering perhaps tens of thousands of dollars to employees to come up with innovative AI solutions.

The program was piloted early this year in 2026. It'll distribute awards on a quarterly basis. Kind of interesting to see how KPMG moves along with that. Young people need to be developing AI solutions to help their managers and to establish value for themselves. We as business owners are looking for innovative AI ideas to help us operate that much more competitively and productivity and profitably.

So, yeah, maybe cash awards maybe significant cash bonuses to employees to encourage to come up with those solutions is the way to go. We will see.

All right. You have been watching this week's episode of the Paychex THRIVE Week in Review. My name is Gene Marks. If you need any help with your business or advice sign up for our Paychex THRIVE newsletter. Go to paychex.com/thrive and you can get that help that you need. Plus, you'll get links to prior episodes of this podcast.

Hope you enjoyed, hope you learned a few things. I'll be back with you next week with a few items in the news that impacts your business and some thoughts on how to interpret that. See you then.

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/thrivetopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR payroll benefits or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/worx. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive.

I'm your host, Gene Marks, and thanks for joining us.

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