Small and midsize businesses across the U.S. say that inflation is a major concern, and they're being forced to make some tough decisions in order to stay afloat.
That's according to a Q1 2022 index from financial services company Century Business Services, Inc. (CBIZ), released this week to coincide with National Small Business Week. In their survey of over 1,400 businesses — each with 100 or fewer employees — CBIZ found that the top concerns for small businesses haven't changed much since late 2021. Their biggest hurdles are ranked as follows:
- Inflation (64.2%)
- Staffing shortages (55.2%)
- Supply chain disruption (47.1%)
Adapting to inflation
Consumers are already paying high prices for everything from groceries to new vehicles, but small businesses may be forced to respond in-kind to ensure their survival. Almost 70% of businesses told CBIZ that they're in the process of increasing prices, and 19% say they plan to raise prices by 10% or more.
Small business owners also cited cutting costs as an important strategy for growth, but it's also a reaction to inflation. In the survey, 37% of businesses reported that they're implementing cost-cutting or cost-control strategies to keep their expenses down. That could include changes that may or may not directly impact customers, like moving more transactions online, offering electronic invoices or refinancing business debt.
Hiring employees is a persistent challenge
Employee retention is a problem for many businesses, regardless of size. In a December survey, 90% of employers agreed that talent retention was a concern. In that same survey, respondents named the top five changes an employer could make to keep them from leaving, and a compensation increase was their first choice.
When it comes to small businesses, about 42% told CBIZ that they're short-staffed by at least 10%, but roughly the same number of businesses (44%) say they're now enhancing their employee compensation packages and 14.5% are improving their health and financial benefits packages in order to retain and attract employees.
In January, 97% of small businesses who were hiring reported that labor shortages were creating economic challenges for them. In addition to improving compensation, one way businesses are addressing the issue is by turning to contractors for labor. In the CBIZ survey, 40% said they now supplement staff with independent contractors.
Despite their concerns, small and midsize businesses remain optimistic. At the end of last year, nearly 90% of small businesses reported that they expected revenue growth in 2022 and so far they're not wrong. According to the CBIZ survey, small businesses are reporting high growth over 2021, and slightly fewer are experiencing revenue and profit declines than in the last quarter of the year.
Methodology: This survey was conducted between March 22 and April 4, 2022. It includes responses from more than 1,400 businesses with fewer than 100 employees in 27 industries across the U.S.