Small businesses lament inflation

Goldman Sachs survey of 10,000 small business owners shows negative impacts across sectors.
207
Gabe Blauer, co-owner of Catastrophic Creations, a cat furniture assembly and direct-to-consumer e-commerce business in Cascade Township, estimates the business had to raise wages 20% to compete for talent. Courtesy Catastrophic Creations

Small business owners across the country and locally are reporting inflationary pressures are hurting their bottom line and making it harder to survive, according to a recent survey.

In a Goldman Sachs 10,000 Small Businesses Voices Survey published last month, respondents said inflation is hurting their ability to hire and retain workers, forcing them to raise prices on consumers, and rising energy prices are impacting their business.

Ninety-one percent of small business owners surveyed said economic trends such as inflation, supply chain issues and workforce challenges are having a negative impact on their business. Nearly three quarters (73%) of small business owners across all sectors said increasing energy costs are having negative impacts on their bottom lines.

The health of the economy is another worry, as 56% of small business owners said the economy has worsened since January. And while hiring and retaining workers remains the top challenge cited by small business owners, concern for inflationary pressures has increased during the past few months — 88% said inflationary pressures have increased since January.

At the same time, previous worries have not abated. Forty-three percent said supply chain challenges worsened since January, and nearly half (48%) said hiring challenges worsened. Only 5% believe inflation and supply chain challenges will subside within the next six months.

“Small business owners are stuck between a rock and a hard place as inflation and an uneven economic recovery are impacting every part of our businesses with no end in sight,” said Khari Parker, a member of Goldman Sachs 10,000 Small Businesses Voices National Leadership Council and a small business owner in Baltimore. “Small business owners need policymakers to understand that, while most businesses have fully reopened since the pandemic, the road to a full recovery will be long, with new challenges around every corner.”

Inflation has contributed to workforce challenges, as the high costs of attracting and retaining employees is affecting small businesses’ bottom lines and ability to do business, according to the survey. Sixty-seven percent of respondents have increased wages to retain employees, while 61% have increased wages to attract new employees. To offset these increased costs, 60% have passed them on to the consumer by raising the prices of goods or services.

Gabe Blauer is co-owner and director of operations for Catastrophic Creations, a cat furniture assembly and direct-to-consumer e-commerce business founded in 2013 and based in Cascade Township. Blauer is a previous 10,000 Small Businesses Voices survey respondent.

He said while his employees — all of whom are cat lovers — are loyal and love being part of the company’s mission, it’s hard for Catastrophic Creations to compete with larger businesses when it comes to benefit packages and wages. In the past year, he estimates the business had to raise wages 20% to compete for talent.

Blauer added it’s easier for larger and more robust companies to withstand the need to increase wages, along with the constant supply chain and inflationary pressures. 

Inflation shows up in every aspect of Catastrophic Creations’ business, Blauer said, from the cost of wages and materials to the rising energy prices when it comes to the cost of transportation and shipping.

“We’re about to have to do our first price increase in a few years … and we just have to hope that our customers are going to be OK with that,” he said.

Like Blauer, small business owners in the survey said there appears to be a tale of two recoveries. Eighty-eight percent of respondents said small businesses are struggling relative to larger companies in their local communities.

The feeling of a recovery favoring big business goes deeper, with:

  • 42% reporting they have lost employees to larger businesses that are paying more
  • 65% of businesses impacted by supply chain challenges saying it’s a problem for their business that suppliers are favoring large businesses over small businesses
  • 70% worrying about employees leaving their businesses because larger businesses can offer higher pay and more generous benefits

Small business owners in the survey said they believe Congress could better support small businesses with more modern programs. Eighty-six percent believe the federal government should do more to level the playing field so small businesses are better able to compete with larger companies, while 93% say the federal government should do more to tailor programs and services to better reflect the realities and needs of small businesses.

“Small businesses are sending a clear signal that the economy and the challenges they face — like inflation, workforce, supply chain and energy costs — are going from bad to worse,” said Joe Wall, national director of Goldman Sachs 10,000 Small Businesses Voices. “It has been 22 years since Congress reauthorized the Small Business Administration. With small businesses struggling to compete with larger companies and suffering setbacks as they recover from the pandemic, it is time to modernize the Small Business Administration through reauthorization to meet the challenges of today’s economy.”

Blauer said he believes reauthorization of the SBA — which would update funding levels — would go a long way toward addressing the current struggles he and other small businesses are facing.

This report is based on a survey of 1,107 Goldman Sachs 10,000 Small Businesses participants conducted by Babson College and David Binder Research from April 11-14. The survey included small business owners from 48 U.S. states and two U.S. territories.

Goldman Sachs 10,000 Small Businesses Voices is an initiative for program participants to organize and advocate for policies that matter to them. It builds on Goldman Sachs 10,000 Small Businesses, which over the past decade has provided access to education, capital and support services to more than 10,000 small business owners across all 50 states, Puerto Rico and Washington, D.C.

Facebook Comments