Profitability Falls 1.3%, Employees Expect Financial Guidance, AI Drives B2B Growth

Hey everybody, it's Gene Marks, and welcome to this week's episode of the Paychex Thrive Week in Review. This is where we take a few items from the news, and we talk about them a little bit because they impact your small business and mine.

The first news report comes from Yahoo Finance. Small businesses are seeing their profits squeezed as higher gas, shipping, labor, and operating costs eat into revenue. Yahoo Finance reports that small business profitability fell 1.3% in April from a year earlier—the weakest reading in two years. Owners interviewed described the grind of working harder while keeping less on moving goods, with transportation and delivery costs especially painful for companies, as well as serving customers across wide areas.

The story underscores a familiar small business problem. Even when sales hold up, margins can deteriorate quickly if owners can't raise prices enough to offset inflation. For many operators, the challenge is balancing customer price sensitivity with the need to protect cash flow. The takeaway; Inflation may have cooled in headline terms, but many small firms are still dealing with very real cost pressure.

Now, I cannot reemphasize this enough. For the past few months, I have been speaking to many industry associations around the country, and we've been digging into their numbers and, you know it as well as I do, the costs of running your business have gone up a lot. We are talking about utilities, compensation, freight, the cost of aluminum and steel, overall production costs, construction costs, as well, the cost of concrete and bricks and lumber. All of these things have gone up anywhere from 20 to 50 percent in just the past four to five years. It's a lot.

So, what do you do? Well, we have time to go through all the different advice and strategies that I have for you, but I can tell you this much; A lot of my clients are focusing on cutting overhead wherever they can, maintaining their employment levels, investing in technology like AI as well, and raising costs, raising prices where they can. But when they raise prices—and you should pay special attention to this— don't just do an across-the-board price increase, target your price increases to specific customers. Run a list of your top 20 customers and really look into them and see how much price increase, what you can get away with and what you might not want to for fear of losing your customer.

Price increases, investing in technology, managing overhead—all these things—are things that we need to do as inflation is higher and really projected to continue to stay at higher-than-normal levels for the rest of the year. So, prepare for and navigate around it.

Before we get going into our next story, let me remind you as well about cutting your costs when it comes to HR and payroll services. Now, I can't promise a price reduction, but I can certainly promise a lot more productive use of your time. Hire Paychex to take care of your HR and your payroll. You will then find yourself doing the things that you do best while you outsource to the experts to do the rest. If you want to learn more about how Paychex can help you with your HR and payroll needs, go to paychex.com/meetpaychex. That’s P-A-Y-C-H-E-X dot-com forward slash M-E-E-T-P-A-Y-C-H-E-X. There will be a link as well in the show notes.

All right, let's move to our next topic. This comes from InvestmentNews.com. Employees increasingly want workplace benefits that help them manage their personal lives, not just traditional retirement plans. InvestmentNews.com reports that nine in 10 employees would consider leaving their current employer for one with benefits that are higher or better aligned to their financial goals, while 85% said they would feel more committed if benefits were tailored to their needs.

The article points to a growing expectation that employers provide help with budgeting, retirement planning, debt, emergency savings, and broader financial wellness. For business owners, this is a retention issue. It's also a recruitment issue, as well. Workers are treating financial support as part of total compensation and employers that ignore it may lose the talent that they need to companies offering more practical personalized benefits.

The message is clear, everyone; Financial wellness programs are moving from nice to have to a competitive tool for hiring and retention.

Now, full disclosure, and I said this before on this podcast, this news comes from InvestmentNews.com, which is widely read by the wealth management and investment industry. So, obviously, there is some motivation there for news like this so that employers can get more wealth managers involved and they can charge for their services to help their employees manage their finances better. Fair enough.

It's still a very, very good point. I am seeing more and more of my clients provide help, benefits to individual employees to help them manage their own finances. Now, there was a time where there were cloud-based applications—and there were still plenty of them out there that that served that role—but really the most effective benefit that I have seen is when an employer hires an outside CPA or financial management person or a wealth management expert, puts them on retainer, and makes them available for their employees to get advice.

Your employees need help. They need help figuring out how to pay their mortgages, put money away for retirement, save for college education, take advantage of certain tax credits or deductions, all of that stuff out there. The more better—ha, the better that they are—at managing their personal finances, the more comfortable they are financially, the better and more productive they'll be at the office and more appreciative that they will be.

This is a benefit that's definitely a retention tool, but it can also attract good employees, as well, once they find out that you care more just as much about how they do outside of work as they are doing on the job, as well. So, a big demand is to get some financial wellness compensation benefits to help your employees manage their financing.

All right, finally, in this week's AI News, there is a report from the U.S. Chamber.com where they list out five B2B AI startups that are helping businesses large and small drive growth. These startups, Ethosphere, ShopSight, Slip, Voicebox and Wholescale; They're applying AI to practical business problems rather than abstract technology requirements.

So, their tools address employee coaching, customer feedback, digital receipts, product demand forecasting, reviews and retail management. Just to give you some examples, Ethosphere uses voice analysis to help managers coach their frontline workers. ShopSight helps brands test product ideas and forecast demand. Slip turns receipts into digital marketing touch points. Voicebox lets customers leave voice feedback that AI can analyze, and Wholescale helps brands collect and distribute reviews across sales channels.

It's a small business angle and it's very, very important. These companies are building tools that can be used by these smaller firms. It's not just for larger enterprises. The article's broader point is that AI is becoming more accessible, affordable, and workflow specific, helping smaller companies improve sales, service, and efficiency.

And everyone, I am seeing that all over the place. Smaller and smaller companies are digging into AI. They are connecting their AI chat bots to their data. They're making better use of their office applications, and a growing number are employing AI developers to develop solutions for them just for a few thousand bucks that might pick off some low-hanging fruit with a good AI app.

All of these things are happening. You should be looking into AI applications or at least how AI can help you in your business, as well. Talk to an AI developer for that kind of help. You can find plenty on LinkedIn. Even your friends at Paychex might have some ideas for you.

My name is Gene Marks, and you have been watching or listening to this week's episode of the Paychex Thrive Week in Review. Three things. So, number one, if you need help with your HR payroll in your company go to paychex.com/meetpaychex. Number two, subscribe to this podcast on YouTube and also on your favorite podcast platform that way you'll be up to speed on all the things that impact your business. And finally, point number three, if you need any tips or advice or help in running your business, sign up for our Paychex Thrive newsletter. Go to paychex.com/thrive.

Thanks again for watching or listening. Hope you enjoyed and got good information this week. We'll see you again next week with more news that impacts your small business and mine, and we'll talk a little bit about 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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