PROVIDENCE – Inflation, supply chain issues and labor costs are top of mind for small-business owners, according to a new survey, released Monday by the Goldman Sachs 10,000 Small Businesses Voices program.
Labor was cited as the top challenge small-business owners face. The survey found 45% found it most difficult finding and retaining qualified employees, while 28% cited inflation and 17% said it was supply chain issues.
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Of those surveyed, 91% reported those economic trends negatively impacting their businesses, 56% said the economy has gotten worse since January 2022, 25% said the economy has stayed the same and 16% said the economy has improved over the same period.
Both supply chain issues and employee retention have impacted Taste of Design, an interior design company in Middletown. Owner Patti Watson said because her small business is an end-to-end interiors business, working with clients during their build and furnishing of their homes, Taste of Design has seen the supply chain woes from construction to design.
“We are in lockstep with our general contracts, architects and subcontractors so when they hit a supply chain issue, it throws a kink in the chain and things need to be reselected and re-sourced,” Watson said. “We do what we call ‘value engineering’ around here because of those supply chain issues. We are uniting with our clients and general contractors to find ways to get them what the design intent is and what the client’s wishes are for less with rising costs, constantly scrambling, troubleshooting solving issues during the construction part of the project.”
The survey found supply chain issues have negatively impacted the bottom line of 73% of small-business owners surveyed. Of those who were surveyed, 43% said supply chain issues have gotten worse since January 2022, while 37% said it stayed the same and 11% said it got better.
“Because of everything we have heard about from appliances to the foam that goes into sofas, to fabric, to any kind of metallic finish that quite often has a long lead time involved, we are finding that our suppliers, whom we are in constant contact with, they don’t know, themselves, when things are coming in,” Watson said. “So they will issue a date when we can expect that sofa or faucet and they miss the date repeatedly over again because they don’t know the dates themselves. We have been in troubleshooting mode for two-plus years now.”
The inflated costs of attracting new employees and retaining current employees are affecting small businesses’ bottom lines and ability to do business. Of those small-business owners surveyed, 67% have increased wages to retain employees and 61% have increased wages to attract new employees. This has forced 60% to increase the prices of goods or services.
Watson said that although she has a strong 15-staff team, she did have two employees leave to return to their families post COVID-19 and she has noticed an increased competition for good talent. Because of this, she increased her employee benefits package at the beginning of the year to retain and attract more employees.
“We are seeing increased costs here to operate the business to remain talented, well-staffed and competitive,” Watson said. “We are one of the lucky ones. There is a demand for our services in this region, but we could be doing so much better and we could bringing more back to the communities in terms of economic growth and impact if we could get those two issues solved for us.”
However, despite offering higher salaries, 60% of small-business owners have had difficulty hiring due to rising wage expectations and 42% have lost employees to larger businesses that are paying more.
“[Hiring] has improved since we decided to be very generous and it’s working to attract the talent that I want to grow the business,” Watson said.
Most survey respondents were not optimistic about those economic conditions improving.
Only 5% of small-business owners surveyed expect inflation to subside over the next six months. Eighty-eight percent said inflationary pressures on their small business have increased since January 2022, while 10% said inflationary pressures have stayed the same and 1% said they have decreased.
“I am not that optimistic,” Watson said. “We have seen and learned it takes so long for the reaction time. Even when lumber prices went down, it a took a long time to trickle down to our projects. It takes a while for those positive ticks up to reach us. We are in this for a while.”
