A report released Thursday by B2B payment solutions company Veem says that nearly 78% of the more than 800 US-based small business owners it surveyed in March experienced the severe pressure of inflation exacerbated. due to the staff shortage crisis and supply chain disruptions.
According to Veem’s “State of Small Business: Grappling with Inflation Pressures” quarterly report, 32.3% of small business owners surveyed who said they had experienced inflationary pressures said they experienced it “all the time”, while 45.3% she said experience it ‘sometimes’. The other 22.4% said inflation doesn’t apply to them, nor have they experienced it.
It’s a matter of time
But what’s more revealing about the latest inflationary pressures is the timing. Of the 77.6% of small businesses, 41.5% said they have experienced inflationary pressures in the past one to three months, while 23.5% have experienced it in the past four to six months and 10% in the past nine months. However, a quarter of small business owners said inflationary pressures had lasted 10 to 12 months, according to the report. And that’s a red flag for Veem’s CEO, Marwan Forzley. “The battle is real,” he told ZDNet in an exclusive interview. Ongoing inflationary pressures are hitting small businesses across the board, from labor costs and supply costs to the cost of capital. “The longer inflation drags on and becomes a bigger problem, the more impact it will have on the economy as well,” he said.
Forzley notes that small businesses have faced inflationary pressures in recent years, but the high inflation rate — currently 7.9% — raises new concerns among many of the respondents. While 44.5% of small business owners aren’t worried about surviving the inflation storm, 25.7% are, and 19.1% said they aren’t sure they can survive such high inflation . “The general feeling is that this will take some time to sort out,” Forzley says. In fact, 51.5% of the owners surveyed said they don’t think inflation will be resolved by the end of 2022, while 30.8% are unsure when it will be resolved (only 11.6% see inflation by the end) of the year have been resolved).
Other notable highlights of the study include:
- 31% of small business owners say supply chain issues have “somewhat” impacted their business, while 24% say it has “majorly” impacted business.
- 40% say the high cost of inventories has impacted their businesses the most, followed by gas prices at 23%.
- A third say they have cut back on business purchases to keep costs down amid high inflation.
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Between March 1 and March 11, Veem surveyed 829 U.S. small business owners across a variety of industries, including: retail, hospitality, transportation, entertainment and financial services. 78% of small business owners surveyed are freelancers, solopreneurs and entrepreneurs with up to 10 additional employees. About 70% of those companies generated revenues of less than $500,000 last year. Questions posed to small business owners included topics such as experiences with inflationary pressures, inflation compensation strategies, and the future outlook for the inflation cycle. Veem’s quarterly “State of Small Business” report series surveys the same business owners, but the topics vary by quarter. The idea is to take a pulse of what matters to the same dataset of small business owners. This last report is about inflation.
A faster recovery?
While the majority of small business owners surveyed believe they are in this inflationary period long-term, Forzley sees a faster recovery with the help of globalization and technology. “As it has become so much easier of late to access suppliers and labor around the world, I think the recovery will be faster compared to previous bouts of inflation,” he says. “We live in a world that is global and interconnected, so I would leverage the world we’re in to run a leaner business.”
One approach Forzley proposes for small business owners is to switch suppliers and hire people with different cost structures or alternative ways of doing things. Another approach is to optimize labor costs by hiring cheaper labor, in some cases outside the US. That will likely thwart small business owners who strongly believe that American services and products should be made in the US, but using technologies like Zoom, business owners can communicate and coordinate via video conferencing with a more diverse and cheaper labor organization. power. “I can have someone do the same kind of work for me, whether it’s from Canada, Mexico, Europe, the Philippines — name a place. If the person speaks English and is willing to work in my time zone and I can pay a third of the price I would for someone in the US, then my costs change,” Forzley says. “That world of interconnectedness, where local and global converge, offers the opportunity to find different suppliers and different workforces, and that can help you weather the storm,” he adds.