These are tough times for all types of businesses, but it’s especially tough for small businesses that don’t have the financial muscle to overcome labor shortages or the purchasing power to offset the downturn. inflation by negotiating better deals. More than six in 10 small businesses in the United States are struggling to stay afloat in the current economic environment, while nearly a fifth fear bankruptcy in 2022, according to a new survey.
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the Clarify Capital Survey out of 506 small business owners found inflation to be the biggest threat, with 42% citing it as their top concern. About two-thirds said inflation was becoming “more and more of a problem” in 2022. More than three-quarters were forced to raise prices to fight inflation, and more than half said they lost money. customers because of it. Retail businesses were the most likely to see a decline in customers due to rising prices.
Among other key findings:
- 17% of small businesses fear bankruptcy this year.
- 61% said they find it difficult to stay afloat in the current economic environment
- 61% were negatively impacted by supply chain issues
- 26% were negatively affected by the labor shortage
- 22% were negatively impacted by employee retention
For the most part, small businesses have been able to move forward despite labor issues. On average, respondents reported operating with 83% of their regular staff. Owners of remote workplaces reported the highest levels of employee retention over the past year – 87%, compared to 84% for hybrid companies and 81% for on-premises companies.
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But as Clarify Capital pointed out, many companies have been able to keep their doors open despite losing a significant percentage of their workforce. Even on-site businesses such as retail stores and restaurants have reported significant rebounds from the COVID-19 pandemic.
Inflation has been a trickier issue to manage, although it actually costs small businesses less money than labor issues. The main threat from inflation is the loss of sales along the way due to rising prices.
So what can small businesses do about it? Clarify Capital’s chief financial officer, Nishank Khanna, said he will take a multi-pronged approach that includes evaluating and improving unique value propositions to justify price increases.
“Consumers are more likely to pay a premium for your products or services based on the uniqueness of your offerings,” Khanna said in an email to GOBankingRates. “Taking a competitive position in the market allows you to compete on value rather than price.
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Another step small businesses can take is to experiment with different pricing strategies and tiers. This may involve bundling higher margin products and services to create more expensive packages.
“Adjusting prices to find the optimal combination is a never-ending process,” Khanna said. “Having a comprehensive view of the data on how the different levels affect your bottom line is critical.”
Finally, small businesses can hedge against inflation by accepting different means of payment, including cryptocurrency. At least, Khanna said, smaller companies can keep some of their balance sheet in crypto.
“Bitcoin rose to [about] 200% [compound annual growth rate] over the past 10 years,” he said. “Even with a diminished CAGR, it can absorb increases in the monetary supply of fiat currencies like the US dollar.”
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