Small business owners in Maryland and across the country are reporting inflation and supply chain disruptions are having a big impact on their businesses. Small businesses play an important role in our national economy, with small businesses accounting for more than 99% of all Maryland businesses and nearly half of all Maryland employees are employed in one, according to the US Small Business Association.
Small business owners face operational and market-driven challenges, such as inflation, supply chain problems, and labor shortages, according to new research from Bank of America.
Despite these challenges, business confidence remains strong, with 64% of small business owners expecting their revenues to increase over the next 12 months. Additionally, entrepreneurs are continuing to recover from the pandemic, with more than three in five entrepreneurs (62%) feeling their business has fully or partially recovered. Nearly half (48%) said that increased consumer spending was key to getting their business back on track.
Concerns and challenges
Business owners are increasingly concerned about the impact of inflation, supply chain and labor shortages and these factors are driving them to make operational changes.
88% of business owners say inflation impacts their business, causing them to raise prices, reevaluate cash flow and spending for the year ahead, lose sales, reduce business costs, and raise wages of employees.
Not far behind inflation concerns, with 76% of business owners saying supply chain problems are impacting their business as well, causing them to rise in prices, difficulties in sourcing products and supplies, and delays in the delivery of goods and services.
Additionally, 41% of entrepreneurs say that labor shortages impact their business, causing them to work longer hours due to staff shortages, struggle to fill job openings, reduce the products and services they offer, increase their wages and losing customers.
How to respond
While the market is tough, small business owners can take action to mitigate these looming economic challenges. For example, entrepreneurs can raise prices in relation to specific supply issues, rather than raising prices across the board, to avoid frustrating customers, while still taking into account the impact of inflation and delays in supply.
Knowing that supply chain disruptions are likely to persist, business owners should review their networks and consider expanding to include more suppliers. Offering tools such as loyalty programs, honest shipping estimates, and accessible service lines are also key to standing out from the competition and satisfying customers.
As the talent shortage continues, entrepreneurs should focus on employee retention. Offering competitive salaries is key, and other incentives such as flexible hours can go a long way in keeping employees satisfied.
Looking ahead, entrepreneurs believe that new technologies will be critical for risk reduction and success. Many entrepreneurs have already begun aggressively incorporating new technologies: In the past 12 months, 70% of entrepreneurs have adopted new digital tools and strategies, including accepting multiple forms of cashless payments and banking via online apps and furniture.
In the long run, 44% of entrepreneurs plan to prioritize digital over physical sales, and many believe cybersecurity and automation will be critical to success.
About Eze is Vice President, Small Business Bankers Manager, Bank of America, Greater Maryland.