Every month, the National Federation of Independent Business asks its members to name their most pressing problem. The survey lists lots of possible answers — taxes, regulations, labor, and more — but as of April, about a quarter of small businesses continue to list inflation at or near the top of the list.
That’s down from 31% of small business owners a year ago, but it’s still a historically high level of concern about inflation.
“Anecdotally, we hear from small business owners all the time about their struggles to deal with inflation pressures. Whether it’s in the product that they sell or increased compensation, it spans all the different types of costs they have to absorb,” says Holly Wade, executive director of NFIB’s Research Center.
Related: How to Inflation-Proof Your Small Business
Image Credit: Zohar Lazar
Mom-and-pop businesses are trying all kinds of strategies to buffer the blows. At Savannah Taste Experience, which offers food tours in the scenic Georgia city, cofounder Stu Card says inflation has “impacted the cost of every dish, and has slowed tourism measurably.” Card has taken various steps in response, including changing the tasting menus at some restaurants to feature different foods, paying more for the same tastings, absorbing some costs while passing others on to consumers, and offering additional, cheaper tours.
Founder Charles Foreman at the Everyday Sundae ice cream shop in Washington, D.C., says he’s lucky he locked in product prices on two-to-four-year contracts before the current inflation surge, but he’s still feeling the hit on paper goods and utilities. “One thing I’ve done is train my staff on proper portions and specs for each item,” he says.
Card and Foreman are doing exactly what the NFIB urges its members to do: understand that inflationary pressures will come and go, impacting different parts of a business at different times, so it’s best to be flexible and ready to try different tactics to address them.
“Last summer was the pinnacle of the energy crisis, with higher gasoline costs and things like that,” Wade says. “That has eased off now, but labor has not, and inventory and supplies — depending on what they need — has not. For those in the restaurant industry, for instance, food is still very expensive for a lot of them. For construction, a lot of the supplies are very expensive still.”
Related: 7 Tips for Protecting Your Business Against Inflation
Supply-chain disruptions, too, continue to contribute to inflation pressures, according to the NFIB’s monthly surveys. That’s not likely to change, Wade says, because of the way economies of scale function.
“The larger companies get the first deliveries, and then it goes down the food chain,” she says. “So when there’s a supply-chain disruption, even a mild one, it disproportionately affects those smaller businesses. The bigger companies have people to navigate those bottlenecks and have a better chance of securing the goods.”
NFIB members report that they’re battling inflation with a combination of cutting costs in-house, absorbing price increases on products and services, finding ways to increase productivity, and figuring out where to raise retail prices without sacrificing sales.
A key tip is to think granularly, Wade says. For instance, don’t just raise prices across the board. Instead, try to determine which products make the most sense to raise prices on.
“It’s often hard for a small business owner to take the time to think through where they can become more efficient,” she says. “Maybe they can arrange their employees’ tasks to be more efficient and curb costs in that capacity.”
She also recommends using the SCORE program through the U.S. Small Business Administration, which offers webinars on managing inflation pressures and cutting costs.
“When things start getting disrupted,” she says, “it’s really important to take inventory of how you run your business so you can not only see how to cut costs, but where it makes sense to cut costs.”
Related: 3 Key Strategies That Helped My Business Grow During a Recession
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