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Small Businesses
June 21, 2023

Microsoft study: Small businesses intrigued by AI and the opportunities it brings

Artificial Intelligence (AI) is the defining technology of our time. Are small businesses equipped and willing to adapt to the new ways of work?

The data featured in this post is from an internal study, the “Small Business State of Mind” report, commissioned by Microsoft Corporation in May 2023 and conducted by Wakefield Research.

The pace of work has increased exponentially, and people are struggling to shoulder the weight of it all. Small businesses, accounting for 99% of all businesses and employing nearly half of the workforce in the U.S. [i], face heightened pressures due to more limited access to resources—people, revenue, etc.—than neighboring enterprises.

With the emergence of AI, small businesses are poised to benefit greatly from next-generation tools and resources designed to help grow and scale businesses. As new technologies introduce previously uncharted solutions, Microsoft is here to help small businesses make the most out of each opportunity.

Microsoft Store’s second annual “Small Business State of Mind” report—a survey of 1,000 small business owners with 0-24 employees—digs into the top challenges and priorities of this demographic as well as their perspective around the impact AI may hold on their and others’ small businesses.

We found that, while AI curiosity is high, with 79% of small business owners interested in learning more about how to apply to their business, hints of understandable hesitation remain. Read on for additional findings regarding small business’ motivation to implement such technology in their operations and ways Microsoft can support small business success.

Key Findings

  1. Balancing act: Inflation and data security are the largest, growing pain points for small businesses.
  2. Entrepreneur to admin: Small business owners are too bogged down with mundane tasks to focus on innovation, though aspirations remain strong.
  3. AI optimism: AI is seen as a game-changer, potentially providing the level of support small businesses need to grow.
  4. Closing the AI knowledge gap: Many small business owners still need to become more knowledgeable about AI to fully realize the benefits for their business.
Graphic depiction of data provided in the Balancing Act portion of the blog post

With the declining state of the U.S. economy, growing data security risks and more, small businesses have no shortage of obstacles today. Nearly 2 in 3 of small business owners (65%) cite inflation as the biggest threat to their businesses right now, a noticeable increase from the 51% who ranked inflation as the biggest threat to their businesses in a similar question last year.  Notably, the threat inflation poses increased substantially among Black, Indigenous and People of Color (BIPOC) owners, up from 35% last year to over half (54%) this year.

Financial stress, amongst other challenges, leads to tightened budgets in critical areas across business operations, such as data security. Showing little to no improvement over last year (47%), nearly half of small business owners (49%) haven’t invested much in data security and admit to rolling the dice, hoping to avoid a breach rather than investing enough to provide the protection their business needs. Perhaps unsurprisingly, lack of budget is the most common barrier, with 43% reporting they don’t have the financial means to prioritize data security.

Graphic depiction of data provided in the Entrepreneur to admin portion of the blog post

The nature of small business means owners have bountiful room for growth and impact amongst communities but few employees and resources to get things done. Survey results show that nearly half (47%) of small business owners are too overwhelmed managing the day-to-day aspects of their business to have the energy or means to ensure their business is reaching its full potential. This number jumps for Gen Z (65%) and BIPOC (52%) owners that feel the same way.

Given its clear heavy gravity, we investigated the root of small business’ overwhelm. Findings show that communicating with customers (66%), managing budgets and accounting (50%), and administrative tasks like data entry and scheduling (48%) are the business operations tasks that take up the most time in small business owners’ days. Meanwhile, 59% of those owners say they would spend more time innovating new ideas to boost their business if they could find extra time in their workday. The drudgery of work unavoidably distracts from owners’ impact-focused work blocks.

This is backed by Microsoft’s 2023 Work Trend Index report [ii], revealing that people who struggle with the time and energy to do their job are 3.5x more likely to have a hard time with innovation and strategic thinking. All dots point to how the increasing pace of work is costing small business owners significant bandwidth and creativity, which would otherwise be used toward bringing the dreams behind their businesses to fruition.

“Pressures are and always will be all around us—from our economy, inboxes, customers—and for small business owners, it’s impossible to press pause on work,” says Brenna Robinson, general manager of Microsoft 365 small and medium business. “Today, they need simple solutions that can help them achieve their business goals without complex tools or additional technical resources. We recognize the mental and physical load entrepreneurs carry and are dedicated to empowering them to do more of the work they want to do for their business and communities.”

Graphic depiction of data provided in the AI optimism portion of the blog post

Small business owners recognize the potential AI holds to improve their day-to-day work and the future of their business. Nearly half (47%) say AI could be a valuable asset or game changer for their business, including more than half of Gen Z (71%). And greater understanding yields higher expectations: Nearly 9 in 10 who consider themselves experts in AI (88%) view AI as a game changer or valuable asset for the business.

More than half of small business owners (56%) say their business could benefit from AI solutions to create more efficient business operations, with the most common areas of interest for AI-based solutions being analyzing customer data and trends (49%) and automating repetitive tasks like order tracking and customer service (46%). Perhaps due to their greater understanding of AI, Gen Z owners are looking a step further and most commonly noted more effective ad campaigns (51%) as an area their business could benefit from implementing AI solutions.

Luckily, AI can help lift the burden across previously time-consuming business areas. In March, we announced Microsoft 365 Copilot, which can save small businesses time by leveraging AI to automate routine tasks, streamline business workflows and provide valuable insights to help owners make the right decisions. Learn more about Microsoft 365 Copilot and additional new productivity solutions from Microsoft.

Graphic depiction of data provided in the Closing the AI knowledge gap portion of the blog post

Despite small business owners’ optimism and imagination surrounding the possibilities of AI, many need to become more knowledgeable about AI to fully realize its benefits for their business. In fact, only 10% know how to use AI for their work-related tasks while 67% say they know little to nothing about AI in general.

However, small business owners have their reasons for not yet educating themselves or more closely embracing AI for their businesses. While financing or costs (51%) is the most common challenge in incorporating more AI, many are also concerned about challenges that stem from lacking a firm AI understanding, including prioritizing where to start (41%) and skilling/training on the best ways to use it (41%).

A recent study from Microsoft [iii] found early adapters of technology are four times more likely to be highly confident in their business as they achieve more progress against business objectives. So, the good news and potential hint for what’s to come: Most small business owners are ready to dip their toe or further immerse themselves in new technologies as nearly 4 in 5 (79%) are interested in learning more about how AI can be used in their business.

The bottom line

The AI evolution is an incredibly significant technological inflection that will help to define how all businesses work for decades to come. In a time where 34% of small business owners expect their businesses to decline in the next 12 months, up from 28% of those who felt the same last year, we encourage small businesses to explore exciting new capabilities and small business resources to help them grow, cut costs and improve efficiency.

We invite small business owners to take advantage of free resources on Microsoft’s Small Business Resource Center as well as explore products and solutions within the latest Surface for Business and Microsoft 365 portfolios to get AI ready.



[i] U.S. Small Business Administration. (2023). Frequently Asked Questions About Small Business.

[ii] Microsoft. (2023). Work Trend Index Annual Report: Will AI Fix Work?

[iii] Kevin Peesker. (2022). Microsoft study: Small and medium-sized businesses growing fast by embracing digital technologies.