Business owners are now facing the challenge of rising inflation after managing two turbulent years with the COVID-19 pandemic. According to a January 2022 report from the NFIB, 22% of business owners consider inflation as the most important and immediate problem they are facing.
Key research findings include:
Part 1: The Economy, Inflation, and Pricing
- Getting customers remains the top challenge for small business owners but cash flow, inflation, and supply chain disruptions are growing concerns.
- Most business owners are worried about inflation. 30.5% list inflation as a top concern and another 62.5% are generally concerned as they keep an eye on rising prices.
- Due to continued economic uncertainty, three out of four business owners (76.4%) report feeling ambivalent about the economy – either somewhat positive, somewhat negative, or neutral.
Part 2: Business Impact and Resolve
- Many small business owners (62.7%) have seen their profits decline over the past six months. Only 15.5% reported profits were higher than expected.
- Profits are declining because sales have declined for 58.6% of small business owners surveyed, and expenses have risen for 59.5%, compared to six months ago.
- Vendors and suppliers are charging 65.7% of business owners more than they were six months ago. More than half of business owners (53.5%) now pay more for utilities (including gas).
- Rising costs cause cash flow problems for one-third (35.9%) of the small business owners surveyed.
- To improve profitability, some small business owners are seeking more profitable clients, some are adjusting their product mix or improving technology, most are raising prices.
- 54.8% of business owners found it necessary to increase prices to match price increases in the market. All but 7.8% of those surveyed have raised prices by 5%-20%, with an average increase of 11%.
Small businesses are growing increasingly concerned about inflation as prices soar and economic instability continues. Many are struggling to keep up with rising costs and maintain profitability, with some even having to close their doors permanently. These challenges are compounded by a tight labor market and supply chain disruptions, leaving small business owners grappling with difficult decisions and uncertain futures.
Small businesses are adopting new strategies to fight back against inflation as it squeezes their profits. SCORE highlights some of these strategies such as adjusting pricing, diversifying suppliers, and optimizing cash flow. Additionally, they suggest that small business owners consider offering new products or services to increase revenue and reduce the impact of rising costs.
The Megaphone of Main Street data report series by SCORE provides insights into small business trends and challenges in the United States. The reports cover a range of topics such as the impact of the COVID-19 pandemic on small businesses, financial management strategies, and marketing tactics. The data is collected through surveys of small business owners, providing valuable information for entrepreneurs, policymakers, and other stakeholders interested in the success of small businesses.