The NFIB Research Center released a new survey assessing the impact inflation is having on small businesses. Small business owners first signaled inflation issues in the summer of 2021 when NFIB’s Small Business Economic Trends survey found increasing numbers of small business owners reporting “inflation” as their single most important problem. In March 2022, “inflation” overtook “labor quality” as the top business problem for small businesses. This survey was conducted from April 14-17, with 540 responses collected.

“Inflation is a new challenge for most small business owners,” said Holly Wade, Executive Director of NFIB’s Research Center. “Inflation has reached levels not seen for the last 40 years and is dominating business decisions for small employers across the country. Small business owners have been adjusting business practices in order to compensate for the inflation pressures resulting from supply chain disruptions, staffing shortages, and rising gas prices.”

Overall, all small employers reported inflation was impacting their business to varying degrees. Over half (62 percent) reported that inflation is having a substantial impact on their business while about a third (31 percent) reported it had a moderate impact. Only 6 percent of owners report it having a mild impact.

Specific costs:

• Owners reported that “inventory, supplies, and materials” and fuel (gasoline, diesel, fuel oil, etc.) are the top contributing factors to higher costs in their business.
• Over three-quarters (77 percent) of small employers reported inventory, supplies, and materials as being a substantial contributor to higher costs, while 18 percent reported moderate.
• Over three-quarters (77 percent) of small employers reported that rising prices for fuel (gasoline, diesel, fuel oil, etc.) is a substantial contributor to higher costs.
• Labor, rent, and utilities contribute to cost pressures for many small employers, but to a lesser degree than supplies/inventory and fuel.

Absorbing costs:

• The main tool small employers have to absorb inflation pressure costs is to raise prices for goods or services, passing higher input costs on to their customers.
• Eighty-six percent of small employers are increasing the price of their goods or services.
• Eighty-four percent reported experiencing lower business earnings to some degree.
• Owners have also reported reducing the quantity of the goods or services offered to help stabilize cost increases with about a fifth (21 percent) of small employers reporting reducing the quantity of materials or goods used to produce the final product(s) to absorb higher costs.
• Thirty-one percent of small employers are taking on debt to finance higher costs.

Prices:

• Sixty-eight percent of small employers are planning to raise average selling prices in the next three months and 22 percent were not sure.
• Forty percent reported they would raise prices by 10 percent or more and about half (47 percent) reported between 4-9 percent.
• Almost three-quarters (72 percent) of small employers reported assessing the adequacy of their price levels of the goods or services they provide more frequently than twice a year.
• Thirty-one percent reported assessing price levels weekly, 21 percent monthly, and 20 percent every few months.
• About half (46 percent) of small employers have contracts with customers with fixed price agreements, making price adjustments more difficult depending on the terms of the contract.

Energy and gas costs:

• Nearly all (99 percent) of small employers reported the recent increase in gas and fuel prices is having some degree of negative impact on their business.
• About half (48 percent) report it has a substantial negative impact, 35 percent a moderate negative impact, 16 percent a mild negative impact, 1 percent a positive impact, and 1 percent no impact.
• Forty-two percent of small employers characterized the cost of energy used in their business (electricity, natural gas, gasoline, and fuel oil) as one of the five largest business costs they have.
• When asked what activities business energy costs are primarily linked to, 26 percent said heating and/or cooling, 5 percent said lighting, 40 percent said operating vehicles, 26 percent said operating equipment and/or processes, and 3 percent said other.

Other:

• Forty-four percent of small employers reported that in the last six months they have been unable to acquire a key input needed to produce a good and service they offer to customers.
• About a quarter (27 percent) of small employers have experienced an increase in theft of their products or supplies over the past two years. Fifty-nine percent have not and 14 percent reported does not apply.

Read the full survey here.