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Small Business Owners Struggling with Inflation

With the roll-out of the vaccination program and the opening up of many industries, there had been a renewed sense of optimism facing the small business community in the US. Such optimism was, however, short-lived, marred for many small businesses in recent months by inflation.

Inflation is attributed to demand outstripping the supply of goods and services, in other words when supply is limited but demand remains high. With products in limited supply, prices are pushed up.

By reducing the purchasing power of money since greater funds are needed to purchase the same items, small businesses, which often operate on limited cash flow, can be particularly impacted by inflation.

Reports show that the yearly pace of inflation recently hit a 30-year peak of 4.4%.



Small Business Owners Struggling with Inflation

Many small businesses are struggling with inflation at present. Goldman Sachs’ recently published ’10,000 Small Businesses’ report showed that 86% of small business owners are struggling with inflation.

The survey uncovered that inflationary pressure is hammering many small businesses, with 84% of small business owners stating they have seen an increase in operating costs. 74% of the survey respondents say their business’s financial health has been negatively impacted by inflation.

Small Business Optimism Falls to 7-Month Low

In October, due to the worsening shortages of labor and supplies, optimism among small business owners fell to a seven-month low. According to the National Federation of Independent Business (NFIB), small business confidence slipped by 0.8 points to 98.2 in October, marking its lowest level since March.

Much of the angst is attributed to businesses inability to get sufficient supplies or materials on time so they can keep operating at full capacity. When they can get their hands of supplies, business owners are being forced to pay significantly higher prices due to increased competition for supplies.

Supply shortages are expected to persist, which could be potentially even more damaging for small businesses as we head towards the holiday season.

As William Dunkelberg, NFIB chief economist, says: “One of the biggest problems for small businesses is the lack of workers for unfilled positions and inventory shortages, which will continue to be a problem during the holiday season.”

The Biden Administration has taken steps to ease the issues affected supply chains. One such step was having ports in Southern California work 24/7.
For some small businesses owners though such moves are too late. Thinking along these lines is Salas, a hairstylist in South Nashville, who said:

“I’m still having a struggle getting product in because of what’s happening in California. Prices went up for us for shampoos and products.”

Image: Depositphotos


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