Inflation Forced Small Business Owners to Pivot, and It's Finally Paying Off
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When it comes to inflation, much ink has been spilled on the pinch it’s put on family budgets. But two recent reports document how strongly small businesses, too, have been hit by rising prices and interest rates, and how they've had to reinvent the ways they operate to stay afloat.
“High inflation also created hardships not only for consumers but for businesses nationwide,” Keith Savage, a statistician for the U.S. Census Bureau, wrote in a October 2023 Bureau report. These modest enterprises, often with only a handful of employees, have struggled as the cost of supplies and labor have skyrocketed, along with the cost of borrowing.
A key reason they've endured is their ability to change with the times, a new survey concludes. "Despite the challenges posed by inflation and interest rates, small business owners seem to adapt to the current economic climate and demonstrate impressive agility and resilience," said Tomer Barel, president of the B2B payment service Melio, in a news release for the survey.
Indeed, despite widespread concerns about lingering inflation and high interest rates, most small business owners say they now feel equipped to handle any upcoming economic headwinds, according to the poll, which was released in November 2023 by Melio.
The U.S. Small Business Administration says the country boasts 33 million small businesses, comprising nearly half of the private sector workforce — making these ventures the backbone of the American economy.
How small business owners are coping with inflation
Small businesses have been forced to make a range of notable changes to weather the economic storms since COVID hit in 2020. But Melio’s poll found that four strategies in particular have helped small businesses to stay afloat.
- Tapping into reserves: More than 6 in 10 business owners told Melio they had to dip into their business savings account or take out a small business loan so far this year.
- Raising their own prices: Half of businesses increased their prices to offset the rising costs of labor or supplies, with many reporting a price increase of 7% over the last six months.
- Changing up the menu: If a product or service is too pricey to offer, one workaround is to simply dial back in that particular area. Some 45% of businesses said they reduced the production of certain goods or services.
- Going more digital: Beefing up their online presence has helped many businesses reach their customers, with 58% of respondents saying they increased their digital presence over the past year — in part to be able to accept more forms of payments beyond cash.
Melio’s survey was based on 1,000 responses from small business owners and conducted in September.
Its key findings underscore that small business owners are starting to feel much more optimistic lately. That finding coincides with Census data showing small businesses have experienced far fewer supply chain disruptions in recent weeks and are — finally — benefiting from moderating costs from suppliers.
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