Small businesses are being hammered by inflation — increased costs of inputs, including increased costs associated with hiring and retaining workers, and increased costs resulting from supply chain issues. While inflation is a concern for businesses of practically every size and in practically every sector and every corner of the country, main street businesses that are feeling its effects most acutely.
What is most worrisome, as the Federal Reserve reported in its April 20 Beige Book, inflationary pressures are expected to loom “like a dark shadow over businesses and the economy” for the foreseeable future. Troublingly, the Fed report blames the current inflationary trends on “firms continuing to pass swiftly rising input costs through to customers.”
Small businesses are not to blame for inflation — indeed, nothing could be further from the truth.
NEXT Insurance surveyed 1,000 small-business owners in March. In the survey, 35 percent of respondents reported that they had considered shuttering their businesses in the last 12 months. Clearly, small businesses are among the victims of inflation, not the perpetrators of it.
In addition, NEXT found that to mitigate the negative effects of inflation and just keep their doors open, many small-business owners have had to work longer hours or cut their own salaries. In other words, small businesses are finding creative but painful ways to absorb some of the inflationary pressures they are feeling, rather than passing them on fully to their customers, contrary to the Fed’s terse analysis.
Still, it is for only so long that small-business owners can absorb inflationary pressures, and eventually the increased price of inputs must be passed along to customers. This is not an easy decision.
Through True North Equity Partners, we operate five trucking companies of different kinds. As such, we are situated at the nexus of supply chain and inflation challenges. The conversations that we are having with our customers are difficult: We know we must increase our rates to pay for increased costs of fuel and other inputs, but at the same time we dread the effect of our increased rates on our customers and on their employees.
The federal government should recognize small-business owners’ commitment to customers and to our nation’s economic wellbeing, rather than trying to place blame on small businesses like the Fed has done.
At this critical moment, federal economic policies should strive to provide relief and certainty, not to exacerbate the inflation problem by imposing greater burdens and creating more uncertainty. Policy priorities should be revised now to maintain and provide confidence. This means reversing the burdensome regulatory and tax policies that have already been advanced and abandoning others currently being pursued.
Its overall gloomy outlook notwithstanding, the NEXT survey contains a silver lining: Its findings suggest a certain resolve among small-business owners. More business owners with 20-plus employees (43 percent) say they are feeling more optimistic than those with nine or fewer employees (22 percent). This underscores the grit and determination to succeed and to improve the world that characterize main street business owners.
Main street businesses stand ready to help our country recover from its economic mess and just need to be freed up to do so.
