US small businesses say simpler online government tools will support their growth
- More than two-thirds of small businesses want better online tools for government business services such as submitting official documents and fulfilling tax obligations.
- Half of entrepreneurs struggle to stay on top of regulatory complexity, and only 22% think it’s easier to open a business today than it was five years ago.
- Two-thirds of small businesses moved online in the last five years, and 42% earn more than three-quarters of their revenue online.
SAN FRANCISCO AND DUBLIN—Stripe, a financial infrastructure platform for businesses, today released survey results which demonstrate that US small businesses think better online government tools—for everything from tax compliance to accessing government loans—are one of the top factors that could allow them to move faster and generate more revenue.
US entrepreneurship has continued to grow over the past four years despite historic headwinds. Americans filed 10.5 million new business applications during 2021 and 2022, and new business formation has increased 44% since 2019. As more of that growth happens online, entrepreneurs believe the government services critical to businesses need to follow them online, too.
The online businesses powering the entrepreneurship boom have business models that are innately complex, often spanning many different tax jurisdictions as they sell across local, state, and national borders. This leads them to need better online access to government business services; they report that a lack of such streamlined tools is holding back their growth.
The findings are based on survey responses from 1,400 small business owners operating online in the US. Nearly half said they are seeing double-digit revenue growth, even as the overall economy struggles, and nearly two-thirds reported that they’ve moved online in the last five years. Forty percent said they now make more than 80% of their revenue from internet sales.
At the same time, two-thirds of small business owners emphasized the need for greater attention to the government tools required to start and run a business. That includes allowing founders and entrepreneurs to electronically submit official documents to agencies like the IRS, and making it easier to fulfill tax obligations and access government programs for loans and working capital. Only 22% reported that it’s easier to open a business today than five years ago, and nearly half said they struggle to stay on top of new regulations.
“For more and more small businesses, the internet is increasingly vital to their success,” said Emily Glassberg Sands, head of information at Stripe. “Just as technology made building an online business quick and convenient, entrepreneurs now expect government services related to taxes, hiring, and accessing capital to be just as efficient and user-friendly.”
The internet is helping small businesses grow more quickly
The 33 million small businesses in the US are a powerful economic engine, employing 60 million people, creating nearly two-thirds of new jobs, and generating more than 40% of economic activity. Much of their success depends on having the right infrastructure in place to support their ongoing growth, whether it’s traditional infrastructure like roads and ports, or digital infrastructure like payments systems and customer data tools. Seventy-seven percent of survey respondents said having the right digital tools is critical to their future success.
Better internet tools connect businesses to a larger customer base, wherever those businesses are located. More than 125 US cities have experienced 10x growth in overseas trade since 2017, and more than 300,000 US businesses on Stripe now make at least 10% of their sales from international customers.
Today, there are more than 470 cities in the US where businesses on Stripe collectively process over $100 million annually, including Temecula, California where nearly 100 businesses have earned more than $1 million each in lifetime revenue on Stripe. One of those businesses, Temecula Coffee Roasters, used internet tools to bring hand-crafted coffees to retail, wholesale, and dropship customers in the US and around the world.
“We’ve been an online business since day one because we wanted our website to be the first port of call for our customers throughout the US and around the world,” said Bryan Rauch, owner of Temecula Coffee Roasters and a participant in the survey. “By getting online early, we’ve managed to take our successful local roasting operation and turn it into an international coffee retailer that reaches customers from Canada to Australia. We could never have done that without the internet and the digital tools that are now standard for running a business today.”
Government support for internet infrastructure
The success of businesses like Temecula Coffee Roasters is important for the US economy. It also creates the need for improved online access to government business services.
Unlike an in-person business, which might only need to know the tax rules where it is located, online businesses need to comply with every tax jurisdiction they sell into. There are more than 11,000 tax jurisdictions in the US, and 86% of SMB owners surveyed said they want the government to simplify the tax compliance rules they face when selling online. They also said tax compliance is becoming even more complicated, especially with salaried employees increasingly working across multiple states in a given year.
Two-thirds of the small business owners surveyed by Stripe said they would like to see greater investment in online government tooling for businesses. They emphasized three priority areas: tax compliance, access to capital, and access to government services.
Sixty-one percent said they want more government services to be available online. This includes making permanent the pandemic-era rules that allow entrepreneurs to apply online for Employer Identification Numbers (EINs), which are a prerequisite for essential tasks like opening a bank account or applying for a business license. Additionally, 70% said the government should do more to make small business loans and grants accessible online.
“There are plenty of helpful government programs out there for grants and small business loans, and many of these programs provide help with applications. But the application processes are still too cumbersome and confusing, and often require extra help to navigate,” said Rauch. “For many small business owners, hiring a consultant to help with the application process can be more expensive than the amount of funds they’re looking for, and when they do successfully apply, it can take months for the funds to arrive.”
Overall, small business owners surveyed by Stripe expressed optimism about the economic opportunity available to them through the internet—and better access to government business services online will help them take advantage of it.
Stripe is speaking to more entrepreneurs to understand how it can help them grow faster and share their insights on regulation with policymakers. To contribute to this research, get in touch at email@example.com.