Inflation is a Major Issue for Small Businesses According to Recent Data

According to research issued Thursday by B2B payment solutions provider Veem, roughly 78 percent of more than 800 US-based small business owners questioned in March have been feeling the effects of inflation, which has been exacerbated by the workforce shortage situation and supply chain disruptions.

According to the quarterly study, 32.3 percent of small company owners asked said they encountered inflation pressure "all of the time," while 45.3 percent said they experienced it "part of the time." The remaining 22.4 percent stated that inflation does not apply to them and that they had not experienced it.

But the timing of the latest inflationary pressure is more telling. 41.5 percent of the 77.6 percent of small firms reported experiencing inflationary pressures in the previous one to three months, 23.5 percent in the previous four to six months, and 10% in the previous nine months. According to the research, a quarter of small company owners reported that inflationary pressures had lasted 10 to 12 months. That raises a red signal for Veem CEO Marwan Forzley. "The challenge is genuine," he said in an exclusive interview with ZDNet. Prolonged inflationary pressures are hitting small firms across the board, from labor and supplier costs to capital costs. "The longer inflation goes on and becomes a bigger concern, the greater the damage on the economy," he added.

Several experts say that small firms have faced inflationary pressures in the past, but the present high inflation rate of 7.9 percent is causing fresh concerns for many survey respondents. Although 44.5 percent of small company owners are not anxious about weathering the storm of inflation, 25.7 percent are, and 19.1 percent are unsure if they can withstand such a high inflation rate. "The common consensus is that this will take some time to figure out," they add. In fact, 51.5 percent of owners polled believe inflation will not be handled by the end of 2022, with 30.8 percent unsure when it would be resolved (only 11.6 percent see inflation being resolved by year-end).

Among the survey's other major highlights are:

Supply chain concerns have "slightly" harmed 31 percent of small company owners, while 24 percent believe they have "greatly" damaged operations.

The rising cost of goods has had the greatest impact on 40 percent of enterprises, followed by gas costs at 23 percent.

One-third have reduced corporate purchases to keep expenses down in the face of increased inflation.

A quicker recovery?

While the majority of small company owners polled believe they will remain in this inflationary environment for the foreseeable future, one expert predicts a speedier recovery because of globalization and technology. "Because access to suppliers and labor throughout the world has been so much easier recently," he adds, "I do believe that the recovery will be speedier than in previous instances of inflation. Because we live in a global and linked society, I would harness the environment we live in to operate a leaner business."

Many experts recommend that small company owners change suppliers and hire those with various cost structures or other methods of doing things. Another strategy is to reduce labor expenses by recruiting cheaper labor, which may be found in some situations outside of the United States. That is likely to irritate small business owners who believe that American services and products should be manufactured in the United States, but with the help of technologies like Zoom, business owners can communicate and coordinate with a more diverse and less expensive labor force via video conferencing. "I can hire someone from Canada, Mexico, Europe, the Philippines, or anywhere else to perform the same sort of work for me. My expenses will alter if the individual knows English and is willing to work in my time zone, and I can pay them a third of what I would pay someone in the US," one business owner adds. "That world of interconnection, where local and global weave together, allows you to access new suppliers, different labor, and that can help you weather the storm," he says.