Small businesses are the economic engine that runs countries across the globe. Such businesses comprise a larger share of the economic landscape than big firms. Despite how essential a thriving small business sector is, such firms are vulnerable to the fluctuating economic conditions, particularly in the aftermath of the global pandemic.
According to ValuePenguin, powered by Lending Tree, 86 percent of small businesses are facing economic challenges as of 2022. The latest MetLife and U.S Chamber of Small Business Index has identified issues that many small businesses are confronting in the current economic climate.
· Inflation: The Index indicated inflation is the number one concern for small businesses today, with 53 percent of firms reporting this is the biggest challenge they are facing. When the survey was conducted, inflation was up 30 percentage points year-over-year. Also, according to Goldman Sachs’ 10,000 Small Businesses Voices survey, more than 76 percent of respondents said the financial health of their business had been hurt by inflation in recent months.
· Supply chain issues: Larger corporations may be able to source their products from many different vendors to keep shelves stocked, but smaller businesses often experience difficulties when items become unavailable. An Oracle survey reported that 80 percent of consumers would stop buying from a brand entirely if they experienced delays or shortages in their orders. This has been troubling to small businesses who have found it harder to compete with larger firms amid supply chain disruption.
· Revenue generation: As the costs of supplies and labor has risen due to inflation, small businesses have struggled to generate revenue. The U.S. Chamber of Small Business reported that, in the fourth quarter of 2022, nearly seven in 10 small business owners said they raised prices to cope with rising inflation as a measure to help mitigate revenue lags. Even after raising prices, certain small businesses have been having trouble breaking even.
· Rising interest rates: Small business owners who rely on loans and credit to finance their business operations have been hit hard by the rising interest rates the Federal Reserve has been implementing to stem inflation. These rising rates, coupled with revenue struggles, are added costs to doing business.
· Recruitment and retention: Finding and keeping quality employees has been challenging for some time. This has been exacerbated by the fact that everyone is feeling the pinch of rising costs, and individuals need jobs that will offer salaries and benefits that can help them make ends meet. This means that employees may be lured away by the prospect of better pay at big box businesses that may have more available capital to pay employees. In addition, large firms can provide access to less expensive health care plans because they are servicing a greater number of employees.
Small businesses are facing considerable obstacles in the modern economy. Consulting with a business advisor may help entrepreneuers solve these issues.