BY SARAH EWALL-WICE
Source: www.cbsnews.com, April 2022
With prices on the rise, Mindy Godding’s small business Abundance Organizing held a team meeting. Employees of the Richmond, Virginia-based company, which helps people declutter or downsize and unpacks after home renovations and moves, were feeling the strain of soaring costs. Paying for gas just to get to clients’ homes – sometimes as far as an hour away – was eating into their paychecks.
The business immediately redistributed money in the budget and gave team members who traveled $25 gas cards. But the move was only a temporary fix. Godding did not see the problem going away any time soon, so just weeks later, Abundance Organizing raised service rates 25% so it could increase employee pay.
So far, demand for services remains high as the impact of the coronavirus pandemic recedes – but it’s unclear how long it will last after an already bumpy two years.
Inflation has soared 8.5% over the past year, the fastest annual pace of price increases since 1981. The price of gas increased nearly 50% from a year ago. And the cost of groceries is up 10%. Russia’s invasion of Ukraine exacerbated the problem as the country was already struggling to keep up with high demand and supply chain issues during the coronavirus pandemic.
While some of the biggest companies have reported record profits last year and several studies suggest it is driving up costs, small businesses have been feeling the squeeze.
80% of small-business owners say their business’ financial health has suffered due to inflation over the past six months, a new Goldman Sachs 10,000 Small Businesses Voices survey found. Of those, 67% have increased wages to retain employees, and 61% have increased wages to attract new employees. Meanwhile, 60% said they’ve offset their cost increases by passing it off to consumers by raising prices.
Increasing energy costs – up 32% overall over the past year – are having a negative impact on bottom lines, 73% of small-business owners said.
Overall, 91% of small-business owners say broader economic trends, such as inflation, supply chain issues and workforce challenges are hurting their businesses. And while the U.S. economy is considered strong by multiple measurements, 56% of small-business owners say the economy has worsened since January this year.
As small businesses grapple with inflation – it’s adding to other challenges they’re already facing. At the top of the list, hiring and retaining qualified workers remains the top challenge cited by small-business owners, the survey found, as job openings remain near a record high with more than 11 million as of the end of February.