NEW YORK — Inflation isn’t just a four-letter word for consumers, a recent survey finds it’s also crippling American business owners as well. In a poll of more than 500 small businesses, 61 percent say the current state of the U.S. economy is making it difficult for them to keep their doors open.
If you haven’t been sure whether or not you’re paying more for your daily groceries and other goods, respondents have news for you — you are, a lot more! Three in four small business owners (76%) admit they’ve had to raise their prices to combat inflation over the last year. It’s not just a small hike either. On average, American businesses have increased their prices by 27 percent just to stay ahead of inflation.
Unfortunately, it’s a decision that’s also driving customers away — not that prices are much better anywhere else. Over half the poll (51%) report losing business after raising their prices in 2021. That includes 62 percent of retail businesses and 55 percent of companies who do business on-site and in-person.
For reference, inflation is the rate at which prices are increasing — which also means your dollar doesn’t go as far as it used to.
Inflation may be the biggest problem that’s crippling most businesses (76%), but it’s not the only issue. Another 61 percent say supply chain issues throughout the pandemic are impacting their businesses and 26 percent add labor shortages are hurting their bottom line.
Out of all businesses across America, the economic crisis is hitting stores which operate on-site the hardest. Four in five say inflation and supply chain issues are equally responsible for their recent struggles.
Everything costs more now
While some consumers may think companies are raising prices just to pocket more profits, that’s far from the actual truth. The survey, commissioned by Clarify Capital, finds it’s costing small business owners tens of thousands more to keep the lights on each day.
In 2021, respondents say they had to pay an extra $14,275 in incentives to keep their employees from quitting. However, labor shortages still cost these businesses an extra $12,934.
Supply chain issues led to businesses paying out $10,628 more for their goods and supplies and an extra $6,562 due to inflation last year. For small businesses that need employees working on-site, respondents say they paid out over $20,000 in incentives to keep workers from leaving.
Overall, small business owners lost 16 percent of their workforce in 2021. Remote businesses were able to keep most of their employees, with 87 percent staying on board through the pandemic. However, the average on-site business lost one in five employees, retaining just 81 percent of their staff.
More of the same in 2022
Concerningly, American business owners don’t see much changing this year after a rough 2021. In fact, many actually see things getting worse!
Two in three respondents say inflation has worsened since the start of 2022. Rising prices remain the top concern for 65 percent of entrepreneurs this year, with an overall declining U.S. economy following closely behind (61%). COVID variants (49%) and more supply chain issues (47%) are also major concerns for business owners moving forward.
When it comes to keeping workers happy, more in-person store owners are concerned about having to raise wages in order to stay competitive (37%) than remote companies (8%). On-site businesses are also more concerned that 2022 will be their final year open (24%) in comparison to hybrid (in-person and online) businesses (16%) and remote business (15%).