Inflation Top Problem for Small Business
Ninety-one percent of owners say inflation has “substantially” or “moderately” impacted their business
NFIB’s new inflation survey found that inflation remains the most significant problem facing small businesses, with 56% of owners reporting that it has a substantial impact and 35% reporting a moderate impact on their business. Three-quarters of owners also say that inflation pressure is worsening, while only 1% say it’s lessening.
“Inflation has set in on Main Street and owners across the country continue to make business decisions in response,” said Holly Wade, Executive Director of NFIB’s Research Center. “As owners manage the highest inflation rate in decades, they are also managing an ongoing worker shortage and supply chain disruptions, which is hurting their businesses and consumers.”
Seventy-nine percent of small employers report that rising fuel prices are a substantial contributor to higher costs. Inventory, supplies, and materials were another commonly-named contributor at 72%. Thirty-one percent described labor and 4% described rent as substantial contributors.
To absorb inflation pressure, small businesses must pass increased costs on to their customers: 86% of owners report increasing the price of their goods or services. Eighty-three percent of those increasing prices reported that the effort had absorbed “most” or “half” of their cost increases.
Also to stabilize costs, less than one-in-five (17%) small businesses have reduced quantities of the goods or services they offer, while 23% have reduced cost materials or supplies. Twenty-nine percent have taken on debt.
Over two-thirds (71%) of small business owners have raised their average selling prices in the last three months, and a similar number (70%) say they plan to raise average selling prices soon. Nearly half (44%) said they’d raise prices by 4-9%, while another 38% said they intended to raise prices by 10% or more. Increased prices have not led to increased profits, as 82% of owners report lowered business earnings.
Nearly all (96%) of small employers reported increased fuel prices have had some degree of a negative impact on their business. Forty-one percent of owners characterized energy costs as one of their top five business costs, 28% called it one of their top two or three, and 6% their number one largest business cost.