How Inflation Is Changing Small Business Strategies, From Price Increases to Suppliers to Closures
Amid rising inflation, small businesses remain resilient. Just 3.2% of small businesses said in April that they planned to close in the next six months, according to the newest data from the U.S. Census Bureau Small Business Pulse Survey.
That said, nearly 4 in 5 businesses at the same time reported they’re seeing moderate or large increases in the price they pay for goods or services compared to six months prior, and they’re increasingly seeking new suppliers. According to LendingTree chief credit analyst Matt Schulz, that means businesses are likely adapting successfully — but they’re likely feeling the effects of the tumultuous economy.
“The longer inflation lingers, the more impact it stands to have on businesses,” Schulz says. “It may force businesses to adjust their pricing, find a new line of credit, rethink their hiring plans, postpone possible expansion and reconsider other big decisions. Running a business is never easy, but it’s even more challenging in uncertain economic times like these.”
Key findings
- The latest Small Business Pulse Survey data shows that 78.6% of businesses in April reported seeing moderate or large increases in the price of goods and services compared to six months before. That’s up from 76.1% in February. Meanwhile, the percentage of businesses that said in April that they planned to close in the next six months saw a comparatively small uptick compared with the prior April — 3.0% to 3.2%.
- 20 of the 50 largest U.S. metropolitan areas had a higher percentage of businesses reporting price increases than the national average. Milwaukee topped the list, with 86.7% of businesses reporting moderate to large price increases in April. Charlotte, N.C., was close behind at 85.7%.
- More businesses were seeking new suppliers. Overall, 24.2% of businesses in April reported that they planned to identify new supply chain options, up from 14.0% in April 2021. While that may indicate some financial strain, more businesses also said they were seeking new employees (40.3% in April 2022, versus 32.1% in April 2021).
- States where businesses were most likely to report moderate or large price increases were more likely to report seeking new suppliers. Wisconsin, for example, had the second-highest percentage of businesses that reported price increases (87.3%) and the highest percentage of businesses that planned to find new suppliers (34.0%).
- Manufacturers were feeling the price crunch the most. 92.7% of manufacturing businesses reported in April that they saw a large or moderate increase in prices. Additionally, 46.7% reported they’d be looking for new suppliers in the next six months — the highest percentage of any industry tracked.
Nearly 4 in 5 businesses cited moderate or large price increases
In April — the most recent time the U.S. Census Bureau conducted the Small Business Pulse Survey — 78.6% of businesses reported seeing the price of goods and services increase by a moderate or large amount over the prior six months. That’s up from the 76.1% of businesses that reported similar price increases two months earlier in February.
Inflation rose from 7.5% year over year in January to 8.3% in April, largely spurred by global supply chain disruptions from the COVID-19 pandemic and tensions abroad. With widespread labor and goods shortages, the price of raw materials soared. In fact, producer prices were up by 11.2% year over year in April 2022, according to the U.S. Bureau of Labor Statistics (BLS) Producer Price Index.
Despite most businesses reporting price increases, the majority hadn’t planned to close. Just 3.2% of businesses said in April that they planned to close in the next six months, a small rise from 3.0% that said the same the prior April.
Businesses in 20 of the largest U.S. metros were more likely to report price increases than the national average
Bad news for businesses in some big metros: Depending on where they are, they may be more likely to see increasing prices. Of the largest 50 metros, 40% — or 20 — had a higher percentage of businesses reporting moderate to large price increases in April than the national figures.
Particularly, businesses in Milwaukee were the most likely to report price increases, at 86.7%. That’s followed by Charlotte, N.C., at 85.7%.
On the other end of the list, Memphis, Tenn., ranked lowest (though lowest isn’t a bad thing here). Just 55.5% of businesses there reported moderate to large price increases — 23.1 percentage points below the national average of 78.6%. It’s also ranked significantly lower than the second-lowest-ranking metro, Salt Lake City, where 67.6% of businesses reported moderate to large price increases.
Full rankings
| Rank | Metro | % of businesses that reported moderate to large price increases |
|---|---|---|
| 1 | Milwaukee, WI | 86.7% |
| 2 | Charlotte, NC | 85.7% |
| 3 | Columbus, OH | 84.5% |
| 4 | Orlando, FL | 82.9% |
| 5 | Oklahoma City, OK | 82.5% |
| 5 | Louisville, KY | 82.5% |
| 7 | Pittsburgh, PA | 82.4% |
| 7 | Atlanta, GA | 82.4% |
| 9 | Kansas City, MO | 81.9% |
| 10 | New Orleans, LA | 81.6% |
| 11 | Phoenix, AZ | 81.4% |
| 12 | Raleigh, NC | 80.9% |
| 13 | Detroit, MI | 80.8% |
| 14 | Nashville, TN | 80.2% |
| 15 | San Antonio, TX | 79.8% |
| 16 | Providence, RI | 79.7% |
| 16 | Buffalo, NY | 79.7% |
| 18 | San Bernardino, CA | 79.6% |
| 19 | Miami, FL | 79.0% |
| 20 | Portland, OR | 78.9% |
| 21 | Philadelphia, PA | 78.5% |
| 22 | Cleveland, OH | 78.4% |
| 23 | Chicago, IL | 78.2% |
| 24 | Cincinnati, OH | 77.4% |
| 25 | Seattle, WA | 77.1% |
| 26 | Baltimore, MD | 76.6% |
| 27 | Dallas, TX | 76.1% |
| 27 | Sacramento, CA | 76.1% |
| 29 | Boston, MA | 76.0% |
| 30 | Houston, TX | 75.7% |
| 30 | St. Louis, MO | 75.7% |
| 32 | New York, NY | 75.1% |
| 33 | Birmingham, AL | 74.8% |
| 34 | San Francisco, CA | 74.7% |
| 35 | Hartford, CT | 74.6% |
| 36 | Austin, TX | 74.4% |
| 37 | Minneapolis, MN | 74.2% |
| 38 | Denver, CO | 74.1% |
| 39 | San Diego, CA | 73.7% |
| 40 | Richmond, VA | 73.6% |
| 41 | Tampa, FL | 73.3% |
| 42 | Indianapolis, IN | 73.2% |
| 43 | Las Vegas, NV | 71.9% |
| 44 | Los Angeles, CA | 70.6% |
| 45 | San Jose, CA | 70.3% |
| 46 | Virginia Beach, VA | 69.9% |
| 47 | Washington, DC | 68.7% |
| 48 | Jacksonville, FL | 67.8% |
| 49 | Salt Lake City, UT | 67.6% |
| 50 | Memphis, TN | 55.5% |
Source: LendingTree analysis of U.S. Census Bureau Small Business Pulse Survey data from April 11 to 17, 2022 — the latest survey data.
Businesses increasingly searched for new suppliers, hired new employees
Just 24.2% of businesses in April reported they planned on identifying new supply chain options. While that’s a relatively low percentage, that’s up from 14.0% in April 2021 — an increase that, according to Schulz, likely signals financial strain.
“These still may not be huge percentages overall, but it means that a lot more businesses are looking for new solutions,” Schulz says. “When about 1 in 4 businesses are having issues with something as fundamental as their supply chain, that’s a significant thing.”
“I’m sure that increased consumer spending has helped businesses weather the storm,” Schulz says. “Yes, many businesses have had to adapt in many ways in the past couple of years, including raising their prices and possibly paying their employees more, but adaptation is nothing new. It’s what successful businesses do. The fact that 40% of these businesses are looking to hire new employees is a positive sign.”
Businesses may be pushing back on supplier price increases
New Hampshire also appeared on the top 10 list for both (though, similar to above, being at the top of the list here isn’t a good thing). Overall, 83.4% of businesses in the state reported significant price increases — the eighth-highest percentage — and 30.9% planned to find new suppliers (the fourth-highest percentage).
At the other end of the list, the District of Columbia ranked among the lowest for both, with 65.7% of businesses there reporting moderate to large price increases — the lowest percentage — and only 17.1% planning to find new suppliers — the second-lowest percentage.
Similarly, Wyoming ranks ninth among the states with the lowest percentages of businesses that reported price increases (74.2%) and seventh among the states with the lowest percentages of businesses seeking new suppliers (19.8%).
Full rankings
| Rank | State | % of businesses that reported moderate to large price increases | % that planned to find new suppliers in next 6 months |
|---|---|---|---|
| 1 | Nebraska | 87.7% | 26.2% |
| 2 | Wisconsin | 87.3% | 34.0% |
| 3 | Arkansas | 86.2% | 26.0% |
| 4 | South Dakota | 85.9% | 22.3% |
| 5 | Kansas | 84.8% | 23.3% |
| 5 | North Carolina | 84.8% | 25.0% |
| 7 | Maine | 83.6% | 25.4% |
| 8 | New Hampshire | 83.4% | 30.9% |
| 9 | Kentucky | 83.1% | 18.0% |
| 10 | Michigan | 83.0% | 25.3% |
| 11 | Ohio | 82.8% | 30.4% |
| 11 | Tennessee | 82.8% | 26.7% |
| 11 | Indiana | 82.8% | 28.2% |
| 14 | Pennsylvania | 82.5% | 25.4% |
| 15 | Georgia | 82.3% | 25.6% |
| 16 | Arizona | 81.9% | 20.0% |
| 17 | Louisiana | 81.6% | 18.0% |
| 18 | Idaho | 81.6% | 27.1% |
| 19 | Oklahoma | 81.5% | 26.1% |
| 20 | South Carolina | 81.3% | 23.4% |
| 21 | Iowa | 80.9% | 20.6% |
| 22 | New Jersey | 80.7% | 20.7% |
| 23 | Montana | 80.6% | 24.8% |
| 23 | Alabama | 80.6% | 22.2% |
| 25 | Vermont | 79.4% | 29.9% |
| 25 | Missouri | 79.4% | 25.4% |
| 27 | Oregon | 79.3% | 27.8% |
| 28 | Washington | 78.9% | 24.2% |
| 29 | Illinois | 78.5% | 24.8% |
| 30 | Texas | 78.3% | 23.3% |
| 31 | Florida | 78.0% | 25.4% |
| 32 | Connecticut | 77.5% | 19.3% |
| 32 | New Mexico | 77.5% | 15.5% |
| 34 | Minnesota | 77.3% | 32.2% |
| 35 | Massachusetts | 76.9% | 24.4% |
| 36 | Colorado | 76.8% | 24.5% |
| 37 | New York | 76.4% | 21.5% |
| 38 | Alaska | 76.1% | 24.3% |
| 39 | Rhode Island | 76.0% | 28.1% |
| 40 | Maryland | 75.3% | 19.6% |
| 41 | North Dakota | 74.6% | 25.1% |
| 42 | California | 74.4% | 22.6% |
| 43 | Wyoming | 74.2% | 19.8% |
| 44 | Utah | 73.6% | 21.1% |
| 45 | Mississippi | 72.6% | 21.0% |
| 46 | Virginia | 71.7% | 23.1% |
| 47 | Nevada | 71.2% | 23.2% |
| 48 | Hawaii | 71.1% | 24.3% |
| 49 | West Virginia | 70.5% | 33.0% |
| 50 | Delaware | 67.1% | 21.6% |
| 51 | District of Columbia | 65.7% | 17.1% |
Source: LendingTree analysis of U.S. Census Bureau Small Business Pulse Survey data from April 11 to 17, 2022 — the latest survey data.
Manufacturers were most impacted — here’s how other industries stack up
More than 9 in 10 (92.7%) manufacturing businesses in April reported moderate to large increases. Additionally, 46.7% reported at the same time that they’d be looking for new suppliers in the next six months — the highest percentage of any industry analyzed.
This isn’t much of a surprise, as manufacturers have experienced the brunt of the supply chain disruption. While overall producer prices rose by 11.2% year over year in April 2022, prices for energy skyrocketed by 40.0%. Prices for oil and gas were particularly on the rise, reaching record-breaking levels in March before going even higher in April.
Construction businesses were the second most likely to report price increases, at 89.9%. Meanwhile, wholesale trade businesses were the second most likely to seek new suppliers (37.2%).
Full rankings
| Rank | Industry | % of businesses that reported moderate to large price increases | % that planned to find new suppliers in next 6 months |
|---|---|---|---|
| 1 | Manufacturing | 92.7% | 46.7% |
| 2 | Construction | 89.9% | 32.6% |
| 3 | Retail trade | 89.6% | 34.7% |
| 4 | Accommodation and food services | 89.1% | 35.3% |
| 5 | Wholesale trade | 86.0% | 37.2% |
| 6 | Other services (except public administration) | 85.9% | 24.7% |
| 7 | Mining, quarrying, and oil and gas extraction | 84.1% | 21.9% |
| 8 | Transportation and warehousing | 81.9% | 13.9% |
| 9 | Administrative and support, and waste management and remediation services | 77.2% | 22.2% |
| 10 | Health care and social assistance | 73.6% | 17.5% |
| 11 | Utilities | 71.5% | 36.7% |
| 12 | Educational services | 69.7% | 12.9% |
| 13 | Real estate, rental and leasing | 68.9% | 13.6% |
| 14 | Arts, entertainment and recreation | 68.9% | 15.4% |
| 15 | Professional, scientific and technical services | 62.9% | 12.5% |
| 16 | Information | 56.0% | 12.8% |
| 17 | Finance and insurance | 54.0% | 3.5% |
Source: LendingTree analysis of U.S. Census Bureau Small Business Pulse Survey data from April 11 to 17, 2022 — the latest survey data.
When it comes to the industries at the bottom of the list, those least likely to rely on the global supply chain feel noticeably less pressure: Information, technical services, arts and real estate are among the industries where businesses were the least likely to report increasing prices or seeking new suppliers.
The finance and insurance industry in particular hasn’t seen much movement. Just 54.0% of finance and insurance businesses reported price increases — the least of any industry. Of those that did, it’s likely that they experienced a ripple effect from other industries. As the cost of commonly insured goods — such as car parts — rises, the value of claims rises, too, leaving insurance companies footing increasingly larger bills.
Navigating price increases: Tips for small business owners
If you’re a small business owner, you’re likely feeling the effects of rising costs in some fashion. But regardless of whether your supplier’s charging more or you’re noticing fewer customers, there are a few things you can do to keep your business afloat during these changing times. Here are a few factors Schulz recommends:
- Be adaptable. “Adaptability and flexibility are hugely important,” Schulz says. “The more that businesses can quickly adjust to the shifting realities of today’s economy, the better off they’ll be. It’s important to be diligent in watching for cost increases and supply issues and to take action when they arise.”
- Think ahead. Consider making a game plan for scenarios that might arise, such as sped-up inflation, reduced consumer spending and more. “It obviously isn’t possible to foresee everything that might be on the horizon, but taking the time to think about possible speed bumps on the road ahead can serve your company well in the long run,” Schulz says.
- Compare your financing options. It’s difficult to predict where the economy is heading, but it’s a good idea to keep an eye on average business loan interest rates. Additionally, if you’re paying off a business loan, you can use a business loan refinance calculator to determine your current likelihood of receiving a reduced rate and plan accordingly.
Methodology
Researchers analyzed data from the latest available U.S. Census Bureau Small Business Pulse Survey — conducted between April 11 and 17, 2022 — to identify how inflation is affecting small businesses. Specifically, we determined the percentage of businesses that reported moderate to large price increases over a six-month period, at times comparing that to data from Feb. 14 to 20, 2022.
Researchers also analyzed the percentage of businesses that reported (from April 11 to 17, 2022) plans to find new suppliers over the next six months, at times comparing that to the percentage from a year before (from April 12 to 18, 2021). Using the same time frame, researchers looked at the percentage of businesses that said they planned to close over the next six months.