Hopkinsville Brewing Company co-owner Kate Russell, pictured to the right of co-owner Joey Medeiros, said the company had to raise prices due to inflation.
Mary Katherine Russel
Small business owners have had a tough few years.
First, the Covid-19 pandemic has caused many revenue losses. Now they face higher costs as inflation rises.
The consumer price index, which measures the prices of goods and services, rose 8.5% in March from a year ago, while the producer price index, which measures the prices paid by wholesalers, jumped 11.2% year-on-year in March.
For Kate Russell, 40, co-owner of Kentucky-based Hopskinsville Brewing Company, that means everything from equipment and aluminum to grain and fuel has become more expensive.
On average, its total costs increased by about 15% to 20%.
“We sat on this for as long as we could before we finally had to break down and raise prices,” she said. “We felt really bad about it. We still feel really bad about it.”
Inflation, along with supply chain issues and labor issues, are weighing heavily on businesses. According to a survey of 1,107 small business owners by Goldman Sachs 10,000 Small Businesses Voices, approximately 91% said these broader economic trends were negatively impacting their business. At least 73% said rising energy costs were negatively affecting their bottom line.
However, like Russell, small business owners are reluctant to raise prices, according to the latest CNBC survey | SurveyMonkey Small Business Survey for the second quarter of 2022.
Some 75% say they are currently experiencing an increase in the cost of their supplies, but only 40% are increasing prices. That’s down from the 47% of owners who adjusted prices in the first quarter.
Yet passing the cost on to consumers is the main tool small business owners are turning to, according to a separate survey by the National Federation of Independent Businesses. They also absorb some of the higher costs. Some 31% go into debt.
“Inflation is a new challenge for most small business owners operating today,” said Holly Wade, executive director of the NFIB Research Center.
“They are finding it incredibly difficult to navigate through these price increases and anticipating how long these price increases will last,” Wade added.
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Small business owners are also getting creative and looking for alternative solutions, such as reducing the amount of goods and services offered to help stabilize costs, the survey found.
That’s something Jennifer Glanville, Director of Partnerships and Collaborations at Boston Beer Company, sees in her role leading the company’s Brewing the American Dream program.
The initiative partners with nonprofit lenders to facilitate access to capital and also offers one-on-one coaching for small business owners. Recently, the focus has been on helping them with higher costs.
“Consumers expect to spend more whether we like it or not, but that’s really how we can help position these companies to be successful around this and reduce some of their other costs,” Glanville said. .
That may mean looking for efficiencies with ordering and networking as a way to find help and perhaps products and services at a reduced cost, she said.
For his part, Russell is now considering possibly reducing live entertainment and trivial parties to cut expenses. She and her partner also took pay cuts.
Fortunately, customers aren’t really complaining about the price hike, she said, because it’s happening at all levels of the economy. What they’re talking about is the incredible rise in gasoline prices, which rose 18.3% in March from the previous month and 48% from a year earlier, according to the data. from the CPI of the Ministry of Labour.
Mindy Godding, co-founder of Abundance Organizing, says rising gas prices are impacting the bottom line of her home-organizing business.
Sandra Fazzino 2022
That’s what really impacts Mindy Godding, co-founder of home-organizing company Abundance Organizing, based in Richmond, Virginia. Its employees can commute up to an hour to get to work. They soon found themselves spending between $50 and $70 to fill up.
“They felt really stuck and frustrated,” said Godding, who co-founded the company in 2010.
“I was pretty sure that we would start losing employees if we didn’t act in a really definitive way,” she added.
As a band-aid, she gave employees $25 gas gift cards. A few weeks later, the company raised wages for its field workers by 25 to 30 percent, Godding said. To pay for it, it raised prices to consumers.