PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Inflation Hammering Small Business

By at 25 April, 2022, 9:25 am

SMALL BUSINESS INSIDER

By Karen Kerrigan – 

That ugly word of 2022: INFLATION. It’s hitting small businesses hard.

An alarming poll released by Next Insurance reports that 35% of small business owners say they are considering shutting down their business due to higher prices. These small business owners are stressed, burned out, and getting squeezed by supply chain challenges and rising costs across the board, including labor costs, according to the survey.

This inflation stress was also revealed in the previous week’s Small Business Pulse survey (tracked weekly by the Census Bureau), as reported by SBE Council chief economist Ray Keating in a blog post. The April 20 Fed Beige Book also shows how inflation is looming “like a dark shadow over businesses and the economy.” Many other surveys have confirmed that inflation is a treacherous influence that is not only undermining small businesses, but workers, families, businesses of all sizes across all sectors, and U.S. economic stability in general.

As noted by Keating in his review of this week’s Small Business Pulse survey, the key challenges small business owners face are not trending in a positive direction. From inflation, to labor shortages, supply chains and more, the grind remains a tough one for small business owners. In addition, as highlighted by Keating:

“At the start of 2021, 7.1 percent [of small business owners] said ‘I do not believe this business will return to its normal level of operations.’ That increased slightly to 7.4 percent in mid-April 2021. However, it rose to 12.3 percent at the start of 2022, and came in at 12.8 percent during April 11-17, 2022. That’s one of the most troubling trends in this set of polling questions about the state of small businesses.”

Policies must strive to provide relief and certainty, not make matters worse. The tax and regulatory policies being pressed by President Biden and his allies in Congress are making matters worse and driving uncertainty. As we observed in a media release on the inflation numbers released mid-month:

“Small business owners, Main Street entrepreneurs and their employees are getting hammered by rapidly-rising prices. Policies need to be providing as much relief as possible to dig the economy out of this mess. That means a full reversal of the burdensome regulatory and tax policies advanced and being pursued by President Biden that have created massive uncertainty and are driving costs higher. The longer this inflation mess goes on, the harder it will be to dig out of.”

Some Erosion in Business Applications: We are also beginning to see some decline in the very robust business application numbers. As reported by Ray Keating in blog post: “Both total and high-propensity business applications (that is, business applications most likely to turn into businesses with employees) fell in March, and have been on a general decline since May of last year.”

While business applications are still ahead of where they were pre-pandemic, this trend is a little concerning, especially since many of these business applications will not convert to actual businesses.

Bad policies cannot allow a potential and needed entrepreneurial boom to go bust! And, we need to maintain and save as many existing small businesses as possible during this difficult period. Policies must strive to improve conditions and provide relief, and those are the policies SBE Council is advocating for every day.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

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