Small-business owners in Rhode Island and across the country are reporting inflation and supply chain disruptions are impacting their businesses in big ways, according to new research from Bank of America Corp.
Despite these difficulties, business confidence remains strong, with 64% anticipating their revenue will increase over the next 12 months. In addition, business owners are continuing to recover from the pandemic, with more than 3 in 5 business owners (62%) feeling their business has fully or partially recovered. Nearly half (48%) cited increased consumer spending has been critical to their business’s recovery.
Business owners are increasingly concerned about the impact of inflation, supply chain and labor shortages, and these factors are leading them to make operational changes.
Eighty-eight percent of business owners say inflation is impacting their business, causing them to raise prices; reevaluate cash flow and spending for the year ahead; lose sales; reduce business costs; and increase employee wages.
Not far behind inflation concerns are supply chain issues. Seventy-six percent of business owners say those issues are also hurting their business, causing them to raise prices; struggle to source products and supplies; and delay delivery of goods and services.
Additionally, 41% of business owners say labor shortages are causing them to work more hours due to staff shortages, struggle to fill job openings, reduce the products and services they offer, raise wages and lose customers.
The COVID-19 pandemic has taught us all that preparedness and adaptability are key aspects of success in an uncertain business landscape. Most business owners agree, as 57% say they’ve taken steps to address future risks to their business based on the pandemic. Steps they’re taking to address risks include focusing more on digital sales, adopting new technology, diversifying their revenue stream, changing their hours of operation and reevaluating how their businesses are staffed.
Business owners can increase prices relative to specific supply issues – rather than raising prices across the board – to avoid frustrating customers while still accounting for the impact of inflation and supply delays.
Knowing supply chain disruptions are likely to persist, entrepreneurs should review their networks and consider expanding to include multiple suppliers. Offering tools such as loyalty programs, honest shipping estimates and accessible help lines are key to standing out from competitors and keeping customers happy.
As talent shortages continue, business owners should focus on employee retainment. Offering competitive salaries is key, and other incentives such as flexible hours can go a long way to keeping employees satisfied.
With consumer spending a major factor driving recovery, the good news is that we’ve seen through our internal Bank of America data that spending is on the rise compared with last year – despite the effects of inflation – and is returning to pre-pandemic levels in certain industries, particularly travel.
Looking to the future, business owners believe new technologies will be critical to risk reduction and success. Many business owners have already begun aggressively incorporating new technologies – over the past 12 months, 70% of business owners have adopted new digital tools and strategies, including accepting more forms of cashless payments and banking more via online and mobile apps. Longer-term, 44% of business owners plan to prioritize digital sales over brick and mortar, and many believe that cybersecurity and automation will be critical to success.
Nancy Rosedale is small-business banking manager at Bank of America Corp., New England South region.
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