As inflation grips small businesses, here’s how they react

Hopkinsville Brewing Company co-owner Kate Russell, pictured to the right of co-owner Joey Medeiros, said the company had to raise prices due to inflation.

Maria Katherine Russel

Small business owners have had a rough few years.

First, the Covid-19 pandemic caused many to lose revenue. Now they are dealing with higher costs as inflation rises.

The consumer price index, which measures prices of goods and services, rose 8.5% yoy in March, while the producer price index, which measures prices paid by wholesalers, rose 11.2% yoy in March.

For Kate Russell, 40, co-owner of Kentucky-based Hopskinsville Brewing Company, that means everything from equipment and aluminum to grain and fuel has gotten more expensive.

On average, their overall costs have increased by about 15% to 20%.

“We sat on it for as long as we could before we finally just had to collapse and raise the prices,” she said. “We felt really bad about it. We still feel very bad about it.”

Inflation, as well as supply chain issues and labor issues are weighing heavily on businesses. According to a Goldman Sachs 10,000 Small Businesses Voices survey of 1,107 small business owners, around 91% said these broader economic trends are negatively impacting their business. A whopping 73% said rising energy costs are having a negative impact on their bottom line.

Like Russell, however, small business owners are reluctant to raise prices, according to the latest CNBC|SurveyMonkey Small Business Survey for Q2 2022.

About 75% said they are currently experiencing an increase in the cost of their supplies, but only 40% are increasing prices. That’s less than the 47% of owners who adjusted prices in the first quarter.

Still, passing the cost on to consumers is the number one tool small business owners are turning to, according to a separate survey by the National Federation of Independent Business. They also bear part of the higher costs. 31% are in debt.

“Inflation is a new challenge for most small business owners operating today,” said Holly Wade, executive director of the NFIB Research Center.

“They are finding it incredibly difficult to deal with these increased prices and also to estimate how long these price increases could last,” Wade added.

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Small business owners are also getting creative, looking for alternative solutions, such as reducing the amount of goods and services offered to stabilize costs, the survey found.

That’s what Jennifer Glanville, director of partnerships and collaborations at Boston Beer Company, sees in her role as director of the company’s Brewing the American Dream program.

The initiative works with nonprofit lenders to help access capital and also offers one-on-one coaching for small business owners. Recently, the focus has been on helping them deal with higher costs.

“Consumers expect to spend more, whether we like it or not, but it’s really how we can help position these companies for success and keep some of their other costs down,” Glanville said.

That can mean looking for efficiencies in ordering and networking to find support and maybe products and services at a lower cost, she said.

I was pretty sure that if we didn’t take really decisive action, we would start losing employees.

Mindy Godding

Co-founder of Abundance Organizing

For her part, Russell is now looking at potentially cutting back on live entertainment and quiz nights to help cut spending. She and her partner have also accepted pay cuts.

Thankfully, customers aren’t really complaining about the price hike, she said, as it’s happening across the economy. What they’re talking about is the incredible surge in gasoline prices, which rose 18.3% mom and 48% yoy in March, according to the Labor Department’s CPI data.

Mindy Godding, co-founder of Abundance Organizing, says higher gas prices would impact the bottom line of her home organizing business.

Sandra Fazzino 2022

That’s what really influences Mindy Godding, co-founder of in-home organizing company Abundance Organizing based in Richmond, Virginia. Your employees commute up to an hour to work. They were soon spending $50 to $70 to fill up their tank.

“They felt really stuck and frustrated,” said Godding, who co-founded the company in 2010.

“I was pretty sure that if we didn’t take really decisive action, we would start losing employees,” she added.

As a band-aid, she gave employees $25 gas coupons. A few weeks later, the company increased wages for its field workers by 25% to 30%, Godding said. To pay for it, she raised prices for consumers. As inflation grips small businesses, here’s how they react

Gary B. Graves

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