How small businesses are fighting inflation and fear of a recession
Isabel Garcia Nevett is once again making adjustments to her business.
After navigating the pandemic and dealing with rising inflation, she’s now thinking about how her Miami-based chocolatier, Garcia Nevett Chocolates, can weather a possible recession.
With growth for her small business linked to corporate gift giving, she’s worried about cuts in spending.
“All those companies that we are hoping to do business with will be revising their budgets and won’t be doing as much, and that will affect us directly,” said Garcia Nevett, who owns the chocolatier with her sister, Susana Garcia Nevett.
To address these concerns, the sisters plan to offer some less expensive options to both their corporate clients and retail clients in their shop. They are also looking at new vendors and suppliers for their packaging and comparing prices, availability and quality.
Buying a higher quantity of chocolate and supplies is another way they are lowering their costs. To increase foot traffic, the business is launching a coffee menu in the shop.
Garcia Nevett is not alone in her fears about an economic downturn.
Fully 93% of small business owners are worried about the U.S. economy experiencing a recession in the next 12 months, a survey by Goldman Sachs. The poll of 1,533 Goldman Sachs 10,000 Small Business Voice participants was conducted by Babson College and David Binder Research from June 20-23, 2022.
In addition, 38% of respondents have seen a decline in customer demand as a result of inflationary price increases on goods and services.
“What we have found is that small businesses are at the tip of the spear of economic cycles,” said Joe Wall, national director of Goldman Sachs 10,000 Small Businesses Voices.
In other words, they spot economic trends before a lot of others do.
“They don’t see an end in sight in terms of things getting better,” Wall said.
An earlier CNBC|SurveyMonkey Small Business Survey from May found the vast majority of small business owners preparing for a recession.
The past several months have brought higher prices on just about everything. Consumer prices jumped 9.1% year over year in June, while wholesale prices shot up 11.3%.
Some 75% of small business owners said that inflation negatively impacted the health of their business in the Goldman survey. Of those, 62% increased wages in relation to inflation to retain employees and 43% sought new vendors or suppliers to reduce costs
They’ve also had to pass along high prices to their customers. However, small business owners are walking a tight line between dealing with their own rising costs and keeping their customers, with 53% raising prices by less than 10%.
That’s what Garcia Nevett reluctantly did when faced with higher costs, and she found her customers were understanding.
Now she’s holding her breath to see how the rest of the year goes. She’s even put plans for a larger kitchen on hold.
“We want to see how the holiday season is going to be,” Garcia Nevett said. “It is hard nowadays to really plan for the long term.”
Turning to Congress
Garcia Nevett is among the small business owners who are meeting with lawmakers this week during the Goldman Sachs 10,000 Small Business Summit in Washington, D.C.
They plan to advocate for solutions to the challenges they are facing and ask them to reauthorize the Small Business Administration for the first time in over two decades.
“It is long overdue for the government to modernize the policy infrastructure that supports small businesses,” Wall said.
Through it all, business owners remain hopeful.
While 78% said the economy has gotten worse in the past three months, 65% are optimistic about the financial trajectory of their business this year.
“The raw resiliency of the small business community is nothing short of remarkable,” Wall said. “They are arguably the most creative gene pool in the country, being able to pivot at moment’s notice and weather the storm.”