5 min read. July, 2022 – by Phil Fernandes
In May, the Consumer Price Index (CPI) rose 8.6%, which is the highest growth the U.S. has seen since 1981. The report was discouraging because it shows that inflation remains high and likely hasn’t yet hit its peak.
High inflation isn’t just problematic for consumers — it also hurts small businesses. When inflation is high, companies have smaller margins to work with and can experience a decline in profitability.
A recent report shows that inflation is making hiring more challenging for small businesses. In particular, small businesses with fewer than 50 employees are struggling to compete with the wages and benefits offered by larger companies.
Over the past year, hiring has been a challenge for companies of all sizes as employees quit their jobs in record numbers. Businesses were forced to spend more money to attract and keep qualified employees.
According to data from Vistage, 76% of small businesses increased employee wages while 44% added additional benefits. But now, rising inflation has made it harder for small businesses to offer competitive salaries and keep up with larger companies.
The hiring problem has only worsened with the increase in remote workers. Companies in big cities can recruit workers in other states with lower pay scales. That means small businesses aren’t just competing with firms in the same geographic location — they’re competing with companies across the U.S.
Overall, ADP payroll data found that small business growth has declined in three of the last four months, while larger firms continue to grow and bring on new employees.
Staffing shortages can affect small businesses in a number of ways. When companies can’t stay fully staffed, they may have to turn down potential work due to a lack of resources, causing their growth to stagnate.
Plus, staffing shortages make it harder for companies to retain the employees they already have. Since businesses can’t schedule as many employees to work, their current employees are spread thin.
Staffing shortages can also lead to lower production, service delays, or missed deadlines, which can cause additional customer service problems. When customers are dissatisfied and complain more frequently, this can lead to higher employee turnover rates.
Small businesses that are struggling to compete could find some breathing room in the coming months. Reports show that many larger companies that did well during the pandemic are starting to scale back on hiring, which could give small businesses an opportunity to catch up.
But, if the anticipated recession hits in 2022, small businesses will also be forced to scale back on hiring. The Vistage data shows that most small business owners are concerned about what will happen with the economy in the coming year. Only 9% expect economic conditions to improve, compared to 53% in June 2021.
National Business Capital helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth.
Our stress-free online platform is designed for simplicity and speed, helping business owners go from application to approval in a matter of hours. And while we remain a leader in the Fintech industry, our clients agree it’s our personalized service and award-winning team that sets us apart.
From SBA loans to lines of credit, to equipment financing, and more, business owners can access all the different financing programs available to them in one place. Through our streamlined process, we have helped clients secure $2 billion in financing since 2007, and, more importantly, we’ve helped entrepreneurs save a tremendous amount of time and grow faster.
Phil serves as VP of Financing for National Business Capital. He boasts 15 years of sales experience, 10 years of managerial experience, and has been with National for over 6 years. His role at National focuses on managing and directing National’s team of Business Finance Advisors and overseeing project development. Phil is also responsible for Financial Reporting, where he prioritizes results and revenue growth. Phil is passionate about sharing his expertise and insight with small business owners, and regularly contributes articles on National’s blog.