Small Biz Ups and Downs

By | May 16, 2022

Small businesses are the heart of America but today’s economic rollercoaster is a tough ride to handle. According to a recent survey by Next Insurance, small businesses are feeling stressed and frustrated by the state of the economy and inflation.

Only 29% of respondents said they felt optimistic about an economic recovery in the next year, according to the survey of 1,000 small businesses across the U.S., with 35% admitting they have considered closing their business.

Following two years of being hamstrung by pandemic restrictions, small business owners said they are working more hours and about a third of respondents said they are performing duties usually handled by someone else. Thirty percent said employee turnover is high, with 28% reporting they’ve been “ghosted” by employees even though the survey revealed these business are paying about $24 per hour — about $2 more than two years ago. Just 8% of small businesses said they pay less than $10 per hour.

But it’s not all bad news. The MetLife and U.S. Chamber of Commerce Small Business Index yielded a score of 64.1, the highest score since the start of the pandemic. (The low point of the pandemic was reached in 2020 Q2 when the score reached 39.5). This score comes after a tumultuous 2021, where the Index fluctuated more than usual, though ultimately it ended with increased optimism relative to the onset of the pandemic in 2020.

The U.S. Chamber reported that about three in five (61%) small business owners say their business is in good health. Upward trends over the last several quarters to hire more, invest more, and anticipate increasing revenues continued. The quarterly Index, an online survey of 750 small business owners and decision makers, is designed to take the temperature of the sector, see where small business owners are confident, and where they are experiencing challenges.

Meanwhile, 91% of small business respondents said they have had to raise prices due to supply chain issues and inflation, according to Next Insurance, which targets small and medium businesses. Nearly 40% said the increased cost of materials has significantly impacted them in the last six months. Eight out of 10 small businesses said they have been impacted by shipping delays, and shipping costs have skyrocketed.

“This substantial inflation is rapidly becoming a crisis for U.S. small businesses, which operate on low-profit margins and have less flexibility than larger companies,” said Suzanne DuFore, director of research at Next Insurance.

Even so, it is encouraging to see the steady rise in business confidence on Main Street, says U.S. Chamber Vice President of Small Business Policy Tom Sullivan. “Inflation is top of mind for small businesses as it continues to limit power, forcing small businesses to raise their prices and absorb higher costs with their purchasing in already thin margins.”

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Insurance Journal West May 16, 2022
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