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SMBs or small to medium businesses are the backbone to any centralized economy.
And usually, during a recession, they are hit the hardest.
They’re also the most flexible of businesses since it’s more than likely a small business was started by an entrepreneur.
Source: Photo by Suzy Hazelwood (Pexels)
So how are small to medium businesses faring out in the U.S during this time of global recession?
On a broad level, SMBs are increasing employee wages, seeking new vendors and increasing prices.
According to a survey by Goldman Sachs using a sample size of 1,533, 38% of respondents have seen a decline in customer demand because of inflationary pressures, pushing the prices of goods and services upwards.
Consumer prices have increased by 9.1% year-over-year in June and wholesale prices have jumped by 11.3% in the same period.
In the same survey, 75% of small business owners have stated that the health of their company was negatively impacted by inflation.
Of this group, two major approaches chosen by businesses are increasing wages (62%) to keep their employees because of rising household costs and seeking new vendors (43%) who can offer lower prices and reduce total costs.
Another defensive move used by 53% of small business owners in this survey was increasing prices by less than 10%.
Stats always paint a broad picture of the economy. On a micro-level, Miami based chocolatier Isabel Garcia Nevett has chosen to be creative, implementing new channels of business.
Like many other businesses, the owners too are worried about the recession and its possible ill effects.
To protect their business, they’ve opted for less expensive items to offer their corporate and retail clients.
They are also looking at new vendors who can offer lower prices and are buying chocolate in higher quantities to avail cheaper prices.
Alongside these defensive initiatives, the chocolate shop is launching a coffee menu as well for their clients.
Another small business that has during a recession is Ink Spot which operates in Houston County. Now touching 30 years, the custom design store fashions brand new artwork and fits them onto hats, hoodies, and t-shirts.
During the pandemic, Ink spot was hit particularly hard and had to close down temporarily.
The daily workload had reduced from 12 jobs a day to 2 or 3.
Ink Spot was able to continue its daily operations due to a $150,000 federal loan payable over 30 years.
While it’s true that this business may not be affected during the current recession, this shows the pressures an SMB must face during periods of high inflation and recession.
This article is sourced from the following links:
What really happens to small and medium-sized enterprises in a global economic recession? UK evidence on sales and job dynamics - Marc Cowling, Weixi Liu, Andrew Ledger, Ning Zhang, 2015 (sagepub.com)