The Effects Of Inflation On Small Business

A we're hiring sign hangs on the door of a small business.
| 07.14.22
Susan G.

We all feel the pinch from the gas station to the grocery store. Being a small business owner and experiencing this increasingly tough economy is a considerable challenge. We take a look at how inflation is impacting the heart of America: small businesses.

Inflation Stress On Small Businesses

If you’re feeling the stress, you are not alone. 85% of small business owners surveyed by the US Chamber of Commerce and MetLife were concerned about the impact of inflation on their business as of March 2022. The concerns are undoubtedly increasing. Inflation is the increase of costs, products, and services over time. While some inflation is always expected, we’re experiencing a moment of startlingly high inflation. A typical inflation rate would be around 2%. We’re sitting at 8.6% right now. Yikes.

While low inflation can weaken the overall economy, high inflation can be a very challenging burden for small businesses. These are the ways inflation is likely impacting your small business now.

  1. Higher cost to run your business. Everything is more expensive right now; you’re not imagining it. The goods and services you require to run your business cost more from supplies through energy costs. Small businesses are being slammed by an average 20% increase in costs. 16% of small business owners even reported a 50% increase in their costs.
  2. Having to raise prices. While this may be a necessary move to help soften the blow of higher costs to run your business, it comes with the risk of losing customers. You’re not alone, though. 89% of small businesses have had to raise prices to counter inflation.
  3. Dealing with tight profit margins. Gone are the days of easy decision-making on promotions and sales. The base prices are all going up with little wiggle room, contributing to difficulties remaining profitable over time. 
  4. Workforce challenges. Even if you have the money to pay someone, the pool of candidates is simply not there right now. You may be facing reducing your workforce to make up for inflation, which is highly disruptive. 
  5. Looking for ways to save money. Being efficient is more important than ever. That may mean running your business with fewer employees, changing marketing plans and cutting costs, moving to a less expensive location, reducing business hours or offerings, and not keeping as much inventory on hand. If you can even get inventory, that is, thanks to supply chain issues.

It Has To Get Better

Don’t get too discouraged. This won’t last forever, so do your best to get through this. You have two main choices to deal with inflation, just like dealing with a personal budget. Cut expenses or make more money. Said another way, stay lean or go for growth. Your lowered costs need to compensate for the losses due to inflation, or your growth needs to keep up with it. You’ll have to decide which path is right for your business. Regardless, we know it is incredibly difficult for small business owners to absorb this kind of inflation.

With everyone—everyone—feeling the pinch, from owners to customers, this is a time for agility and creativity. What meaningful value can you provide your customers under these circumstances? How can we all help each other? Maybe it is time to have a professional financial expert look at your business. Perhaps it is a time to ensure you have adequate business insurance coverage and a competitive quote, too. Hint: B2Z will cancel your old policy for you, so don’t worry about that.

Solidarity, small business owners. Your small business’s survival is vital to your community, customers, vendors, and employees. It is likely profoundly important to you. Dig deep and tap into your creativity. We’re cheering you on!

About the Author

B2Z Insurance is a small business insurance company that provides coverage for on-the-go business owners: simple explanations, easy application, digital quotes, and mobile claims. A product that is easy-to-use and helps you assess the unique coverage needs of your business with confidence—freeing you up to grow your business.

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