6 Insights About the Small Business Economy in 2022Impact Reports•Jul 20, 2022• 3 min read
Small business owners are responding to record inflation with leaner operations and creative business strategies, according to a new survey from Hello Alice. The survey results reveal some key takeaways about the small business economy in 2022.
In December 2021, Hello Alice conducted a similar survey to gauge owner outlook heading into the new year. This July 2022 follow-up survey measures changing attitudes among owners as inflation, supply chain troubles, the pandemic, and other economic conditions have evolved. These latest results show that small business owners continue to display resilience and resourcefulness even as certain challenges intensify.
Here are some key takeaways on the small business economy in 2022:
1. Despite headwinds, small business owners are still hopeful that their business will grow in 2022.
Overall sentiment has declined significantly since the initial survey, in which nearly 80% of owners expected growth. Nearly five times as many owners expect their business to perform worse this year compared to our first survey.
Even so, the outlook is net positive, with a majority (52%) of small business owners believing their business will grow in 2022.
2. Inflation strongly outpaces COVID worries as the top challenge for small business owners.
In total, 71% of owners surveyed believe the effects of inflation have worsened since the start of 2022. Taken at the height of the Omicron wave of the pandemic, the initial survey found that inflation concerns were essentially tied with COVID-related challenges as the greatest challenge facing small business owners. Six months later, 33% of respondents ranked inflation as the number one challenge they expect to face during the remainder of 2022 — nearly double the second-highest ranked challenge, which still remains the effects of the COVID-19 pandemic.
Owners cited increased cost of goods and services as the most common effect of inflation. In addition, nearly a quarter (23%) of owners specifically mentioned gas and travel as other significant impacts of inflation.
3. Small business owners are most worried about retaining and acquiring customers.
Two-thirds of owners (66%) are concerned about losing customers due to decreased consumer spending and 58% are worried they will not be able to acquire new customers due to price increases.
In addition, other inflation concerns identified in the survey include:
- Reduced profit margins (48%)
- Supply chain shortages (44%)
- Not being able to acquire new customers due to reduced marketing (40%)
- Not being able to meet customer demand (34%)
- Not being able to keep the same business hours due to staffing shortages (21%)
- None of the above (5%)
4. The impacts of inflation vary based on industry.
How owners rate various inflation impacts varies based on industry.
- The Retail, Food and Beverage, and Manufacturing industries all highly over-index on concern for supply chain shortages
- Personal Services and Food and Beverage businesses are significantly more likely to report not being able to keep the same business hours due to staffing shortages
- Personal Services and Food and Beverage businesses are also the most likely to be planning to hire for the remainder of the year
- Food and Beverage businesses reported the most difficulty finding qualified candidates
5. Small business owners are pivoting and adapting to run leaner businesses.
Owners have taken various measures to combat inflation, including:
- delaying or canceling planned purchases (41%)
- reducing supplies and material availability (39%)
- owners working more hours themselves (73%)
- delaying or canceling hiring plans (33%)
Inflation is shifting overall business strategy, too. Nearly 40% of surveyed owners said inflation caused them to pivot or diversify their business to focus on a new product or service offering. In fact, when asked what the single most effective strategy for combating inflation impacts, 28% of owners responded “adjusting product/service offerings.”
The right combination of these strategies appears to help manage the effects of inflation. For example, 48% of small business owners surveyed are worried that inflation will result in reduced profit margins. Interestingly, this concern has decreased 25% since the start of 2022, suggesting that owners’ inflation strategies are working.
6. Small business owners are canceling or delaying their plans to hire.
Labor also remains a persistent and major concern. As previously mentioned, 33% of owners have delayed or canceled hiring plans when attempting to manage inflation. This datapoint closely aligns with previous data. Heading into 2022, 55% of owners planned to hire, yet our most recent survey found only 19% have been actively hiring in 2022 and only 28% definitely plan to hire in the remainder of the year.
Those still looking to hire face an uphill battle. In total, 74% of surveyed owners said they are struggling to find qualified candidates — a 21% increase from the beginning of the year.
Interested in learning more about the small business economy in 2022? Download the full report here.
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