Post-Pandemic Recovery from a Supply-chain impacted economy and the Russia War in the Ukraine
After managing over two turbulent years with the COVID-19 pandemic, business owners now face the challenge of rising inflation. A January 2022 report from the National Federation of Independent Businesses (NFIB) shows 22% of business owners rank inflation as the most important and immediate problem they face. This represents a 20-point increase in ranking since the beginning of 2021, and the highest level since the fourth quarter of 1981.
The impact of inflation on small businesses is also reflected in pricing trends. The U.S. Census Bureau issued weekly Pulse Data reports to track data on business owner sentiment during the pandemic.
Prices for goods and services were tracked starting in the summer of 2021. The number of business owners reporting a large increase in what they paid for goods and services jumped from 28% in mid- August 2021 to 36% by mid-January of 2022. Anecdotal stories about the ways small business have struggled with inflation and rising prices are reflected in daily news.
Comparing now to what was normal before March 13, 2020, how have the prices this business pays for goods and services changed? In this study by SCORE, we asked a large sample of small business owners how they felt about the current economy and inflation outlook, how turbulent economic factors have affected their profitability, and what they have done to protect their businesses in response.
Of the diverse pool of 1,327 survey respondents, SCORE analyzed responses from 1,199 current business owners in three stages of business: start-up, in business and exiting business. The businesses surveyed represent many industries and geographic locations throughout the United States. All respondents agreed to provide an honest reflection of their experiences and outlook.
Part 1 of the study focused on “The Economy, Inflation and Pricing” and explored current business owner sentiment about the economy, inflation and pricing. The key findings were:
- 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 of the study focused on “Business Impact and Resolve” and asked small business owners how they’re managing profits, sales and expenses in the current economy, and their response to business challenges to stay profitable. The key findings were:
- 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%.
SCORE is the nation’s largest network of volunteer, expert business mentors, with approximately 10,000 volunteers in more than 230 chapters and 1,500 communities nationwide. Since its founding in1964 as a resource partner for the U.S. Small Business Administration, SCORE has helped more than 1 million current and aspiring entrepreneurs start, grow or troubleshoot a business through mentoring, workshops and educational services. In 2021 alone, SCORE volunteers helped create 25,084 new small businesses and add 71,475 non-owner jobs to the American economy.