If you own a business or know someone who does, then you’re aware of the challenges of the past few years. It has not been easy.
As you know, I own multiple businesses myself. I’ve faced these challenges as well. Things have improved from the onset of the unknowns that came with the start of the pandemic. But the pandemic has created all kinds of confusion, unknowns and struggles. Even in the face of adversity you still grind and forge ahead to grow your business.
Small business is vital to the economy as small businesses account for almost 50% of GDP and employs about half the private workforce.
Each month I review the report from the NFIB on their Small Business Optimism Index. It gives tremendous insight into what is going on across small business America.
This was the first paragraph from the NFIB Small Business Optimism Index June 2022 Report.
The NFIB Small Business Optimism Index dropped 3.6 points in June to 89.5, marking the sixth consecutive month below the 48-year average of 98. Small business owners expecting better business conditions over the next six months decreased seven points to a net negative 61%, the lowest level recorded in the 48-year survey. Expectations for better conditions have worsened every month this year.
After I read that I didn’t want to read on any further. It’s tough to continue reading the negative and gloomy outlooks. I did so anyway. Something had to be positive.
As the chart indicates below, we are at an all-time low in small business confidence. The outlook is staggering when you consider it’s significantly lower than it was during the pandemic.
The report states that inflation is the biggest challenge facing small businesses. But that’s well known across all sized businesses, in addition to literally everyone in this country. Inflation has been widely discussed and we all know it’s a major problem. Getting that under control would have a sweeping impact for everyone. But that’s going to take time.
There were three charts in the report that stuck out to me.
As you can see the expected and planned sales, prices and compensation have sizable gaps versus the actuals.
When gaps like this are going on you’re not able to accurately plan or price your product or service. Inflation along with the supply and demand swings has made the pricing and hiring for your business extremely challenging.
When business are trying to set prices for their products it’s hard to be accurate when the price fluctuation is changing so fast. Compensation and how many workers needed stem off of that.
What businesses really need is some stabilization. A stabilization in inflation and the pricing components. This allows to better understand the needs moving forward. They’re then able to price properly and can figure what they will need for labor and if they need to hire.
The past few years have provided anything but stability. As we get into the second half of this year we have oil and commodities coming down. Lumber has come down. Getting the major resources that companies rely on to stabilize will go a long way to improving much across the business landscape. The ongoing dilemma though is how long before that happens? Until then we’re still going to experience a lot of unknowns just like we’ve been dealing with the past two years.
After you take all of the above into account you sure wouldn’t think new businesses would be starting in this current environment. But that’s exactly what’s happening.
What sectors are seeing new business applications growth?
The start of COVID produced a spike in new business starts. The surprise is the large spike has actually been sustained.
It’s clear Americans are not afraid of launching their own businesses. COVID changed the mindset and has woke the entrepreneurial spirit in many people. This is a great thing long-term.
As inflation and the overall economy stabilizes it will benefit small businesses across the country. It’s going to take time but it will eventually come. Think of a valley where you can see the other side. You just can’t tell how far down the valley goes or how far it is to the other side. Businesses that weather this storm and are there on the other side will reap the rewards of the risks they took.
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