Main Streets Meet Machine Learning: Inside the AI Productivity Boom for Small Businesses

Generated AI opens new doors for small and medium-sized businesses, making it easier to launch and compete. 30% of entrepreneurs say AI lowers barriers to starting a business, and over 60% believe it will help level the field with bigger players.

While only 22% of small businesses use Genai regularly, four in five people have more than 20% reporting productivity gains, with revenues up at least 20% at 40%. Rather than replacing workers, many companies are using AI to expand their staff, reducing just 5%. Most companies focus on writing and research, taking careful consideration of complex tasks such as financial analysis.

Despite these early victories, many small businesses lack formal AI strategies and remain cautious about costs, technical challenges and data privacy.

Generated AI has a major impact on the economy, and is being used by small and medium-sized enterprises. While much of the discussion about Genai focuses on large companies, small businesses are making huge profits from technology, including significant productivity and revenue benefits. As Genai is leading many business owners to invest more in the workforce rather than reducing it, employees willing to learn new AI-related skills are also benefiting.

As Genai is an asset for small and medium-sized businesses, there are plenty of opportunities to gain even more from technology. Most small businesses don't have a formal genai strategy, but those that do so see the biggest productivity gains. The genai revolution is still in its early stages, and it is clear that the impact of technology only grows as entrepreneurs become accustomed to it.

The report is based on a survey of 1,480 small business owners from Gusto Platform, and showed us how they use Genai and how it affects your business.

With Genai's increasing capabilities, it is easier for entrepreneurs to pursue new ideas.

Among entrepreneurs who considered launching new businesses last year due in part to advances in AI, 83% said AI has lowered the barrier to new companies entering the market.

Disruptive technology allows founders to operate more efficiently and build innovative products and services that separate their customers from their larger competitors, and many entrepreneurs see Genai having similar impacts. Over 60% of small businesses report that Genai is increasing innovation, 48% increase marginally profits and 13% increase significantly. That might explain why 62% of small business owners believe that Genai levelles the arena with larger competitors.

Like the internet and workplace software before it, Genai is driving a new wave of productivity gains for small business owners. However, unlike the 1990s, AI adoption is happening at a much faster pace when many entrepreneurs struggle to understand how the internet can add value to their businesses.

More than four years after the launch of Mosaic, the first widely used web browser in 1997, only four have accessed internet and have been doing business online in 10 small businesses. (sauce)

Compare that with today. Less than three years after ChatGpt was released, almost two-thirds of small businesses are experimenting with at least the Genai tool. Additionally, over 40% of entrepreneurs using Genai have already reported that they have increased their revenue by more than 20%.

Many small and medium-sized businesses see productivity. Four of the five small businesses using Genai have increased productivity by more than 20%.

Today, most small businesses regularly use AI for just a handful of tasks (central companies report two regular use cases). But even limited recruitment offers strong benefits. Over 80% of companies using AI in just one in a per-area reported seeing productivity gains, with 16% saying these profits exceeding 20%. These results suggest that even small, targeted applications of AI can have a significant impact.

Genai is also helping small businesses find new ways to head to their customers. 61% of entrepreneurs using Genai say the technology is increasing business innovation. For many companies, profits have been modest so far, but about 1 in 10 people have seen a significant increase in innovation as a result of Genai.

These productivity and innovation profits are leading to higher revenues, with 41% of Genai recruits reporting revenue growth of over 20%.

Genai is especially valuable for solopreneurs. Over 80% of Solopreneur Genai users report productivity gains of over 20%, with nearly half (47%) confirming that revenue has increased by over 20%.

As entrepreneurs bring genai to the core tasks of their business, they see greater profits. Small businesses that use Genai for strategy and decision-making can be 2.8 times more than companies that don't say their technology isn't improving productivity by more than 20%.

While genai's popularity is growing rapidly, many entrepreneurs are gradually consolidating into their business. Only 22% of small and medium-sized businesses employing Genai regularly use this technology.

That trend has been consistent for generations. In each generation cohort we surveyed, over 75% of entrepreneurs using AI experiments and sometimes use it.

The variance in the use of genai is greater in the industry. Companies in the industry that are likely to emphasize written communication and provide text-based products and services are most likely to adopt genai the fastest. Companies with over 20% (23%) of personal services using Genai and professional services (28%) are regular users.

An industry focused on face-to-face interaction or physical manufacturing is early in the genai adoption cycle. Only 10% of products using Genai and 16% of community service companies using Genai are regular users.

For many companies, the next phase of AI adoption includes software tools that can complete a wide range of tasks with less supervision than many chatbots today. Currently, only 17% of small businesses use AI agents, while 42% are considering using them in the future.

Writing and research is the most popular genai use case

Small and medium-sized businesses primarily use Genai to find, summarise and communicate information. Over 80% of small and medium-sized enterprises employing Genai are experimenting with using technology at least in their research and writing.

Small and medium-sized businesses are particularly cautious about using Genai for high-value stones and special tasks, including financial or customer data. Less than 40% of Genai employers even experiment with these more sensitive use cases, highlighting that trust in Genai is still highly context-dependent.

There is a widespread expectation that AI will have a major impact on the workforce, and many focus on the possibility of replacing the need for human workers. However, more than half of entrepreneurs who regularly use Genai have changed the composition of their workforce as a result of their technology, which is much more likely than supplementing employees (34%) or increasing employment (9%) (5%).

One of the most powerful indications of Genai's potential is the fact that many companies see great benefits from technology without a clear strategy on how to use it. Over 80% of small and medium-sized businesses do not have an AI strategy.

But for businesses that spend time putting together their AI plans, efforts are paying off. Almost a third (32%) of SMEs with AI strategies see productivity gains of over 20% compared to 14% of SMEs without AI strategies.

We found a similar trend among small businesses creating guidelines on how employees use AI. While only 15% of Genai employers have AI guidelines or policies, these companies see the most productivity growth. A third (33%) of SMEs with AI policies have increased productivity by over 20% compared to 15% without AI policies.

The biggest opportunity for small businesses to get more from genai may be to improve their employees' skills. Small businesses that provide AI training to workers are most seen growing productivity, but only 43% of Genai employers offer all kinds of training, and around 20% encourage them to learn using AI tools. However, six of the 10 companies that offer AI training increased productivity by more than 20% compared to roughly three of the 10 companies that do not have AI training programs.

Employers take a variety of approaches to help employees develop AI skills. Only half who offer AI training (51%) say they don't offer a formal curriculum instead encourage employees to experiment with AI tools themselves. The other half develops their own high-end programs or have employees access to external training materials.

So far, all the impressive results AI has produced for small businesses is simply damaging the surface. Unlocking new opportunities for growth as businesses move from experimenting with AI to developing clear strategies and guidelines on how to use technology.

As AI adoption accelerates, it is easy to forget how new the new Genai is still. Some entrepreneurs are fully embracing it, while others still don't feel completely comfortable. Their concerns range from how to effectively integrate technology into their business to how they ensure that they do not cause problems for them and their customers.

About half of entrepreneurs can use more support to learn what AI can do for their business and understand best practices for implementation.

If SMEs feel that they have insufficient knowledge of AI, they need more support

For some entrepreneurs, their questions and concerns about AI are preventing them from using technology. Technical complexity and data privacy and security are key barriers to adoption, followed by the challenges of vendor selection and integrating AI into existing workflows.

Educational and user-friendly tools play a key role in helping business owners experience the benefits of AI while minimizing risk.

With all the advances Genai has made in recent years, this technology is still in its early stages. This brings a huge advantage that small businesses have already seen, which is even more remarkable.

The AI revolution is only just beginning, and as Genai tools improve and business owners become accustomed to them, they will continue to find new ways to better serve themselves, their employees and customers.