Operating a successful business in today’s economic climate can be challenging. However, generating a profit has always been a numbers game. Before now, most of the variables that impacted the organization were in the owner’s control. It can be frustrating when external factors draw attention away from the business’s day-to-day requirements.
Recently, The MetLife and U.S. Chamber of Commerce Small Business Index offered insight into the concerns of small business owners. The index is generated quarterly, with the most recent completed in March. Overall, owners feel the economy could be healthier and is declining. Yet, the vast majority (63 percent) are optimistic about their business and feel it is on solid ground.
- Twenty percent of small business owners (SMBs) think the economy is healthy
- Twenty-seven percent of SMBs believed the economy was in good health in Q4 2022
- Twenty-seven to thirty percent of respondents in 2022 believed the economy was good
Inflation: Like their customers, over 54 percent of respondents say inflation is their most pressing concern since it directly links to other issues determining profitability. Inflation was cited as the most significant challenge business faced in every index compiled in 2022—up 30 percentage points from the prior year. No company is immune from the rising costs of goods and diminished opportunities that often result when inflation gets out of control.
Revenue: Generating revenue goes hand in hand with combating inflation. Since everything now costs more, owners have little choice except to raise prices. Paying for the cost of labor and employee benefits would be difficult to maintain otherwise. While 85 percent of respondents agree that offering healthcare is in the best interest of their business and employees, finding the best options is time-consuming.
- Sixty-four percent of owners have a comfortable cash flow
- Thirty-eight percent plan to increase their investments vs. 47 percent in Q4
Interest Rates: Business owners feel pressure as the Federal Reserve gradually raises interest rates to slow inflation. Credit and loans are often the lifelines of every business. When the cost of borrowing money goes up, it creates obstacles to financing new projects and significantly increases operating costs. Higher debt can deter long-term growth and severely restrict the day-to-day cash flow. When interest rates are low, store owners are likelier to remodel or open additional stores.
Supply Chain Disruptions: Few can forget the empty store shelves and cargo ships overflowing with goods but need help to unload them due to a shortage of workers and trucks. Although things have vastly improved, there are still trouble spots that slow the flow of supplies and cause concern. Supply chain disruptions were mentioned by twenty percent of participants. Primarily those who depend on manufacturers to stock their business.
Obtaining Capital: The ability to obtain financing is becoming more problematic for owners than in 2022. Previously only 6 percent of respondents were concerned about accessing capital—the figure has risen to 13 percent. The size of the company and its location within the country play a significant role in the difficulty of finding a loan or obtaining credit. Overall, 49 percent of respondents have good access to credit and loans.
- Fifteen percent of businesses with 1-4 employees find finding a loan or credit challenging.
- Six percent of businesses with 20-500 employees had difficulty getting a loan or credit
- Eighteen percent of owners in the Midwest had trouble finding loans and credit
- Only eight percent of Companies in the West say obtaining capital is a problem
One respondent sums up what many small business owners are experiencing. “Supply costs have increased at a rate beyond anything I could have expected,” says Victoria Kidd, a store owner in Winchester, Virginia. “We have incrementally raised prices several times to keep up with the rapidly changing cost of goods. Even with the increases, we’re barely breaking even.”