It goes without saying that recent years have been economically tumultuous, especially for small businesses. Pandemic and pandemic-related issues forced adaptations across the board to keep operations running as normal or near normal. People and organizations had to display tremendous understanding and flexibility to stay afloat and/or recover from losses. But things haven’t gotten any easier in the post-pandemic era. There’s been no “light at the end of the tunnel” for small business owners. Instead, they’ve been met with sky high inflation, constant supply-chain issues, and a nationwide labor shortage. Let’s take a deeper look at these major challenges that small business owners are grappling with this year and will continue to fight going forward.
Inflation – it’s a talking point that’s hard to escape from nowadays. Virtually everyone is experiencing some level of difficulty in their day-to-day lives thanks to this phenomenon. And it’s no wonder why – inflation levels have reached a historic 40-year high. Businesses small and large are adjusting their strategies to adapt to the current reality. For example, large-scale employers are offering higher wages, which has made it more difficult for small businesses to compete when searching for employees. Furthermore, the high inflation rates have forced small businesses to raise their prices in order to avoid shutting down. According to the US Chamber of Commerce, 67% of small businesses had to raise prices in the first quarter of 2022. Beyond this, inflation is the root cause behind many other internal problems for small businesses, like costlier overhead, travel (those gas prices!), and accommodations.
Accompanying inflation is an unprecedented nationwide labor shortage, with a record 11.5 million unfilled job positions in the United States, with an average of two open jobs for every one person seeking employment. Regardless, many American workers are not re-entering the workforce for various reasons. This has led to a record (yes, another record) 51% of US small businesses reporting vacancies as of May 2022. As mentioned before, inflation is causing large businesses to increase their wages in order to maintain competitive offers, oftentimes to the point where small businesses have difficulty competing. So while large businesses might be able to rough it through the shortage, it comes partly at the expense of small businesses, many of which are at risk of slowing down or shutting down if key positions remain unfilled.
Supply chain issues
Lastly – supply chain issues. This is another one that’s prolific enough that many of us have had to deal with it in some capacity, even if it just means you had an order come later than you’d have liked. But this has been an immensely impactful problem for small businesses, which have had to deal with long waits for manufacturing, production, and distribution, with lead times having “seemingly doubled” overall. Electronics shortages still run rampant, with critical product components like computer chips still severely backlogged, slowing down many different processes for small business, including sales and delivery.
Running a small business is already demanding enough – unfortunately, this year has a lot more in store for them than normal. Small business owners should expect to be impacted by rising inflation and supply chain slowdowns in addition to the already worrying nationwide labor shortage.
“How Small Businesses Can Overcome Inflation and Supply Chain Issues in 2022” [Article]. US Chamber of Commerce. Available at: https://www.uschamber.com/on-demand/small-business/overcoming-inflation-and-supply-chain-issues-as-a-small-business-in-2022 [Accessed Aug 1, 2022]
Bove, Tristan (2022). “There’s a major recession signal everybody is missing: small businesses cutting spending as they prepare for the worst” [Article]. Fortune. Available at: https://fortune.com/2022/06/11/small-business-inflation-prices-hiring-recession-signal/ [Accessed Aug 1, 2022]
“Special Report on Inflation and Supply Chain Shocks on Small Business” [Article]. US Chamber of Commerce. Available at: https://www.uschamber.com/small-business/special-report-on-inflation-and-supply-chain-shocks-on-small-business [Accessed Aug 1, 2022]