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How Inflation is Impacting Small Businesses

1. Optimism is Decreasing

Small businesses are less hopeful for the future, and a lot of them say inflation is to blame. The National Federation of Independent Businesses has published its Optimism Index findings for March 2022. The index works by asking small businesses how confident they are that their conditions will improve within the next 6 months. The most recent findings found that optimism had decreased for the third month in a row. Why is optimism so low?

Well, the NFIB asks small business owners what single most important problem is affecting their optimism. Examples of problems that have ranked highly in the past are quality of labor, taxes, or poor sales. This month, however, for 22% of small business owners, the single biggest problem was inflation, the highest level of concern since 1981.

2. Materials Cost More

Inflation means prices go up, and many businesses are finding that it’s more expensive to run their operations due to higher material costs. In a survey of 1000 small business owners conducted by NEXT Insurance, 87% of business owners have reported that rising material costs have had at least some impact on their ability to operate their business.

Curtis Dubay, Senior Economist with the The US Chamber of Commerce, points to the rise in materials cost, as well as more expensive labor (more on that later) as key drivers behind the inflation we’re seeing at the moment.

3. Prices are Increasing

Many businesses that are feeling the pinch of rising materials are doing the only thing they can do: raise their prices. Greg Hunsinger, owner of Huns’ Cafe 99 in Wilkes-Barre, PA, has said that due to rising costs in ingredients like chicken wings and ground beef, he has had to raise the restaurant’s food prices. And it’s not just him.

The NFIB Optimism Index found that 72% of business owners are planning on raising their prices this year to keep up with inflation, a record high across over 40 years of reporting.

4. Higher Staff Wages

Another finding of the NEXT survey was that inflation is causing small businesses to spend more money on staffing. Small business owners are paying $2 more per hour than the last couple of years, and find that qualified applicants are expecting higher wages to keep up with rising costs.

Forbes quotes Jerome H. Powell, Chair of the Board of Governors of the Federal Reserve System, who pointed out that “record numbers of people are quitting jobs each month, typically to take on another job with higher pay.” Due to their limited budgets, small businesses are employers on the lower end of the wage scale, meaning they are suffering the most from wage inflation.

5. Letting Staff Go

Higher staff wages and increased material prices are putting pressure on the budget available for staffing. Unable to pay the wages staff are asking for, many business owners are having to let go of their full time staff. A survey by the US Chamber of Commerce recently found that 41% of businesses surveyed have decreased staff in the past year in response to inflation pressures. Some businesses are now investigating part-time or temporary staffing options. Snagajob has the pricing options when it comes to hiring part time, seasonal, and full-time hourly workers.

6. Business Owners Working More

Some businesses are having to let staff go for budgetary reasons while others are losing workers to higher paid jobs. On top of that, half of businesses surveyed in the NEXT survey have recently experienced no call no shows, where staff fail to show up for a shift without any notice. As a result of all of these factors, half of small business owners are working longer hours and one-third are doing jobs normally delegated to others.

Want to learn more about how to handle no call no shows? We've got the article for you https://www.snagajob.com/blog/post/no-call-no-show-policy-how-should-you-handle-it

Takeaway

Inflation means rising costs, and for businesses with small budgets this often means sacrifice. Small business owners are facing the question of how to offset this price increase. Increase prices? Let staff go? Take out loans? It’s a difficult question with no right answer. If you’re facing pressure from inflation, our blog and the Small Business Administration website have some resources to help. In the meantime Snagajob has the pricing options when it comes to hiring hourly workers

Tom Quinn |
Tom (he/him) is a growth marketing manager at Snagajob helping small businesses find hourly workers.