DENVER, Colo. — A recession used to be many small business owners' worst fears, but that's changed now. Small business owners said inflation is what's going to prevent them from being profitable.
According to a new report from Kabbage, it showed between July 2021 and July 2022, revenues grew by 87%. However, profits were almost stagnant during that period and actually dropped by 4%.
In that report, 4 out of 5 small business owners said they could weather a recession, but inflation is cutting into profits.
Seventy-five percent of small business owners and operators said inflationary pressure affected their bottom line over the past year, and 56% of respondents expect to continue that feeling through 2023.
“We’re not keeping up with inflation, which means effectively we’re all getting somewhat poorer every time we get a paycheck,” said Stephan Weiler, a professor of economics at Colorado State University. "The problem is small businesses depend on their suppliers, and the problem is the suppliers are increasing their prices along with inflation."
Small businesses had to weather a lot recently, with the pandemic shutting down more than 70% of them, supply chain issues, and now, the high inflation rate above 8% is taking its toll.
"That's why the Fed is so intent on making sure inflation does get crushed,” Weiler said. “This is 'cause people that get hurt the worst are the small guy, so because of that the small guy has to get together and act like one bigger guy."
The study also suggests that business owners' best remedy is to raise prices with 37% saying that was their plan.
Another 22% said they plan to negotiate better deals with suppliers to lower costs.
"If you want your local business to survive, it's worth spending that extra dollar to buy local,” Weiler said. “This is the mantra that we use when these inflation prices start going. You start concentrating on the business in your area."
As of right now, experts are urging consumers to consider small business owners in their spending to help keep their community thriving, which is something business owners could switch their marketing to.
"Those kinds of tactics to use are the ones where you’re marketing a brand and you’re marketing yourself and community at the same time,” Weiler said. “Small businesses can say, 'We are local. We hire local labor, and that's important.'"