Despite surviving pandemic shutdowns and dramatic drops in available customers, small businesses are now contending with a new enemy—inflation.
Key Details
- Small business owners nearly doubled their revenue from July 2021 to July 2022 at 87%, but their profits actually fell 4%, according to a survey from small business lender Kabbage.
- Most of the survey respondents feel pressure from inflation and over half anticipate the pressures to continue into next year.
- Though facing new challenges, the businesses surveyed seem optimistic and have plans in place for the future to combat the changing market.
Why it’s news
Small businesses have been among those hit hardest by the COVID-19 shutdowns, with many still struggling to recover or closing entirely.
Many small businesses are preparing for a recession with 83% saying they believe the U.S. will enter a recession. Even so, 80% of small business survey respondents believe they can survive a recession, mainly because the business owners feel they have learned from the pandemic and feel prepared to tackle difficult economic challenges ahead.
Inflation, however, could be a different challenge. Though businesses have emerged from shutdowns, their clients are now less inclined to spend and operating costs for businesses have increased.
Of businesses surveyed, 37% say they have plans to increase their prices, 22% will negotiate prices with suppliers, and 22% are scraping low-margin products and services. About 33% are turning their focus to customer relations in order to increase loyalty from the customer base.
Inflation is also affecting employee retention as businesses find that their employees need higher wages due to higher cost of living. Just under half of small businesses reported that inflation is causing them to give more pay raises and pay more for employee healthcare.
Though many large businesses have been offering remote and hybrid options for some time, small businesses are beginning to delve into that world as well in order to stay competitive. Nearly half of those surveyed are offering flexible work options.
Of those offering remote and hybrid options, 77% said it has helped their ability to retain employees.
As inflation remains stubbornly high, small businesses will continue to adjust, though it seems many are confident the lessons they learned during the pandemic will carry them through this next challenge.