The Small Business Survey paints a bleak picture and raises concerns about inflation

A third of business owners say inflation is their No. 1 concern.

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Main points

• Inflation was the number one concern for business owners in the NIB survey.
• Hiring the right staff is becoming increasingly difficult for many small businesses.
• Optimism rose slightly this month, but is still below the 49-year average.

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This year’s inflation has made life difficult for many people, from small business owners to families trying to put food on the table. The rate hikes we’ve seen seem to be slowing down. Similarly, inflation is still at a worrying level according to the latest survey conducted by the National Federation of Independent Business (NIB).

A third of small business owners say inflation is their biggest problem, followed by hiring good employees. Transportation, wholesale and construction businesses reported significant challenges in hiring workers.

A glimmer of hope, but many challenges remain

Another key indicator in the NIB survey is the Small Business Optimism Index. The study tracks a number of factors, including employment plans, capital spending and inventory. Together, these indicators show how positive (or negative) small businesses are about the future.

The November survey showed a slight increase in optimism, but was still below the 11-month average. The optimism rate last month stood at 91.9, up from the 49-year average of 98.0. To put that in context, it was 104.3 in January 2020 before the outbreak.

Here are some other key findings from the survey:

• Only 6% of business owners think the next three months are a good time to expand, mostly due to broader economic conditions.
• 32 percent of business owners said inflation was their single biggest problem.
• 44% of companies said they currently have job vacancies they are unable to fill.

How your small business can handle inflation

Unfortunately, inflation affects small businesses because they don’t have the same cushion against higher costs than larger companies. Here are some steps you can take to reduce the impact of inflation.

1. Reduce your expenses

Cutting expenses can be difficult when you’re already working on a shoestring budget, but it remains one of the most important ways to survive high inflation. Scan your budget to find expenses you can shave off, especially fixed monthly expenses that can drain your cash.

Take some time to consider ways to streamline your operations. For example, customer service software can help both improve customer service and reduce costs. Maybe you can automate some of your marketing activities and reach more people with less effort.

2. Communicate with your customers despite the bad news

The decision to raise prices isn’t always easy, but it’s one that many businesses have had to make this year. If you need to do this, be as clear as possible about what you are doing and why. Don’t try to hide it, for example, by reducing the size of your rooms or using conversations. This can destroy trust and ultimately cause more harm.

Instead, be clear and honest about what the price increase will be, and try to ensure that any moves you make are in line with your competition. If you can see any ways to add value alongside the price increase, this can soften the blow. For example, if you don’t have a customer loyalty program, now might be a good time to introduce one.

3. Plan for the best and the worst

If inflation is on the rise, how can you make sure you have enough cash to stay afloat? Consider increasing labor, material, and production costs. Consider what metrics you can monitor that can give you early warning of any problems.

Consider what emergency measures you can take if your forecasts show you can’t handle a price hike. For example, while it is expensive to run an account on a business credit card, this may put you in short-term cash flow trouble.

It can be difficult to imagine what kind of situations you may face. But it’s important to map out what might happen and see what action you can take today. If there is a way to build a business emergency fund, it will give you a cushion against inflation or other economic problems in 2023.

at last

Unfortunately, there is no easy way to deal with high inflation and it is no surprise that it is a key concern for many businesses. However, if you can keep costs down and keep the lines of communication open with your customers, that’s a good start. Projecting your cash flow for different inflation scenarios can give you some insight into certain pressure points and help you avoid them.