Inflation Pressures and Lost Sales Opportunities Challenge Small Businesses, Says Survey

“The small business recovery continues to be held back due to soaring inflation, ongoing supply chain disruptions, and staffing shortages,” said Holly Wade, Executive Director of NFIB’s Research Center. “Most small business owners have raised their prices to adjust to the numerous challenges they are facing.”

Key findings include:

Prices

• About three-quarters (73%) of small business owners have increased their average selling prices due to supply chain disruptions and/or increased compensation due to staffing shortages.
• Of those who raised prices, 44% have raised prices by 10% or more, another 30% have raised prices by 5% – 9.9%.

Supply Chain Disruptions

• Over half (51%) of small business owners reported supply chain disruptions had a significant impact on their business. Another 30% of owners reported it had a moderate impact and 14% reported a mild impact.
• Eighty percent of small business owners experiencing supply chain disruptions reported that the disruption is causing lost sales opportunities to some degree.
• Forty-five percent of owners experiencing disruptions reported it is worse now than it was three months ago.
• Half (50%) of owners reported about the same level of disruption from last quarter and 4% reported it easing up from three months ago.
• The vast majority (89%) of small business owners anticipate the supply chain disruption that is impacting their business to continue for five months or more.

Staffing Shortage

• Twenty-four percent of owners are currently experiencing a significant staffing shortage and another 18% are currently experiencing a moderate
• Of those owners currently experiencing a staffing shortage, 23% are experiencing a significant loss of sales opportunities and 22% reported a moderate loss of sales opportunities because of the staffing shortage. The severity of lost sales opportunities has lessened in recent months due to more owners successfully adjusting operations to accommodate demand.

Business Adjustments

• When asked what adjustments, beyond normal hiring practices, small employers have taken steps to attract open positions, 85% reported increasing wages, 28% increased paid time off, and 22% offered or enhanced hiring bonuses.
• Eighteen percent of small employers offered or enhanced referral bonuses and another 27% offered or enhanced insurance benefits.
• When asked what adjustments have been made in business operations to compensate for the staffing shortage, 43% of small employers experiencing a staffing shortage are offering more hours to part-time employees.
• Sixty-two percent of owners are offering overtime to full-time employees, almost all (91%) employers responded that the owner(s) are working more hours. Over one-third of owners (39%) have resorted to more drastic measures with adjusting business operation hours. Thirty-six percent of employers have introduced new technology to enhance productivity and 37% have reduced the variety of goods and services sold.

Sales Levels

• Over one-third (35%) of small businesses are at or exceeding pre-crisis sales levels, a nine-percentage point increase from early September.
• Thirty-two percent of businesses are back or nearly back to where they were with sales 75% – 99% of pre-crisis levels with another 22% at sales levels of 50% – 74% pre-crisis.

Recent COVID-19 Surge

• January’s surge in COVID-19 cases negatively impacted about two-thirds (68%) of small business owners to varying degrees.
• Twelve percent of owners reported that the surge in COVID-19 cases had a significant negative impact on their business, 19% reported a moderate negative impact, and 36% reported a mild impact.
• Of those owners negatively impacted, 19% reported that the rise in COVID-19 cases significantly impacted employee work attendance. Another 26% reported it moderately impacted work attendance and 34% reported a mild impact.
• Related to sales, 13% reported that the recent surge significantly impacted sales, and 24% reported it moderately impacted sales.

The Economy

• Almost one-quarter (24%) of owners reported that economic conditions are back to normal now in their area.
• Ten percent of owners anticipate an economic recovery in the first half of 2022 and another 19% anticipate the second half of 2022 before economic conditions return to pre-crisis levels.
• Nearly half (48%) of small business owners are less optimistic and expect conditions not to fully improve until 2023 or later.

Taxes

• Nearly a quarter (22%) of small business owners have contacted the IRS for information related to their business(es) in the last 12 months.
• Among those who contacted the IRS, 12% reported their contact with the IRS helpful, 24% reported somewhat helpful, and 64% reported not helpful at all.
• When asked about preparing this year’s taxes, about half of small business owners (47%) reported that preparing their 2020 and 2021 taxes has been more difficult than it was pre-COVID.
• About one-third of small business owners reported that they are planning to or have requested an extension for filing their 2021 tax return.

COVID-19 Small Business Programs

• Only 13% of small employers are very familiar with the Employee Retention Tax Credit (ERTC) and another 41% reported somewhat familiar. About half (47%) of small employers are not at all familiar with the ERTC.
• A fifth of small employers claimed the ERTC for wages in 2020. Another 18% of small employers claimed the ERTC for wages in 2021.

Payments

• Three-quarters (76%) of small business owners reported that they do not use a third-party platform for processing customer payments of their goods and services.
• When asked about shipping products they sell to out-of-state customers, 12% of owners reported frequently, 12% occasionally, and another 12% reported seldom. A quarter of small business owners do not ship products they sell to out-of-state customers.

Travel

• When asked about whether the business owners and their employees traveled by commercial airlines for business purposes pre-COVID, 4% reported frequently, 15% reported occasionally, 13% reported yet but infrequently, and 68% reported no.
• Among the small business owners who did travel or have their employees travel, 21% reported that travel by commercial airlines is back to pre-COVID levels for their business. About half (48%) reported no but it will get there eventually, and 31% reported no, it will likely never return to pre-COVID levels.

This publication marks NFIB’s 22^nd Small Business COVID-19 survey assessing the health crisis impact on small business operations, economic conditions, and utilization of the targeted small business loan programs. The first series was published in early March 2020 with subsequent publications every 3-8 weeks, found here. The full survey of the 22^nd edition is available here.