Small Businesses Fight Back & Adopt New Strategies as Inflation Squeezes Profits
Wednesday, June 8th, 2022
Most small business owners report lower profits than expected over the past six months due to declining sales and higher expenses as inflationary pressures rise, according to new survey data from SCORE, mentors to America's small businesses and a resource partner of the U.S. Small Business Administration.
SCORE's Spring 2022 Megaphone of Main Street: Inflation & the Economy report surveyed more than 1,000 small businesses on the current state of inflation; how turbulent economic factors have affected profitability, and what they have done to protect their businesses in response. Only 15.5% of small business owners reported profits higher than expected, meaning slower sales and increasing expenses are impacting small businesses across the country.
- Vendors and suppliers are charging 65.7% of business owners more than they were six months ago
- More than half of business owners (53.5%) now pay more for utilities, including gas
- One-third of business owners need to increase their own compensation due to higher personal expenses
- 23.4% say customers are demanding lower prices
- 22.7% say current employees are also asking for pay raises due to higher costs
Ultimately, rising costs are causing cash flow problems for 35.9% of small businesses, according to the SCORE survey.
"Small business owners are known to be tenacious and find creative ways to adapt and thrive," said SCORE's Vice President of External Relations Betsy Dougert. "To boost profitability and remain viable, many have taken active measures to combat the difficulties they're experiencing in the economy, such as seeking more profitable clients, adjusting their product mix or improving technology, but most are raising prices."
In fact, more than half (54.8%) of small business owners surveyed found it necessary to increase prices to compensate for rising costs. On average, businesses reported increasing prices by 11%. Others report targeting more profitable clients and customers (39.6%), while 28.8% have changed their product mix.
SCORE client and California entrepreneur Kelly Twichel, co-founder and CEO of the Access Trax portable accessibility pathway, reports that she has had to make adjustments in response to inflation. "We had to raise the price of our products accordingly and plan to do so again, as needed. I am transparent with my customers and give them ample notice to place orders prior to any increase," she says.
Lisa McGuthry, SCORE Cleveland client and CEO of Our Favorite Things Boutique, says her store focuses on local goods and fair-trade products to keep costs down: "We have increased our prices by 5% overall to stay competitive and provide our client base with affordable, quality products."
Visit SCORE.org to learn how SCORE supports small businesses during difficult times, including 24/7 expert mentoring, resilience training and on-demand educational resources.
Click here to download the full Megaphone of Main Street: Inflation & the Economy data report and here for the full infographic.