In two years, small businesses have withstood a global pandemic, a supply chain crisis, labor shortages and rising costs forced by inflation. A recent Forward Agency Investigation from Nationwide reveals that few see short-term relief and are taking alarming steps to protect their business as they anticipate a recession in the coming months.
The current economic environment weighs heavily on American small businesses
Only 27% of small business owners say current business conditions are good in the US, and just over a third feel the same about their own region or city (36%). Their outlook is even bleaker, with 70% of small businesses anticipating a recession in the next six months, but only 37% feeling ready.
The survey also shed light on how business owners have recently been affected by economic instability:
- 6 in 10 small business owners say inflation and rising costs have had a negative impact on them.
- 35% say they have been negatively impacted by interest rate hikes.
- Nearly 4 in 10 (39%) say their company’s revenue has declined over the past six months, with most declines of up to 30%.
Small business owners are looking for creative ways to protect themselves from economic instability
Nearly 6 in 10 business owners (58%) have explored areas to cut expenses in the past six months. Among the most drastic measures, 38% of business owners are using their personal savings to support their business, while 22% have canceled/postponed a major business investment. Perhaps most alarming are the cuts that could impact the labor market – some owners already have or plan to suspend hiring (38%), or furlough workers/reduce hours (23 %) as they prepare for more difficult times ahead. Only 14% plan to hire new employees. Additionally, about 4 in 10 say they don’t plan to offer raises (42%) or bonuses (41%) to their employees this year.
“Small businesses are struggling to maintain operations under current inflation and labor market trends,” said Eric Coleman, senior vice president of small business insurance at Nationwide. “Getting back on track won’t be easy if their recession predictions come true. Which would be worse if, in an effort to cut costs, owners end up putting their business at risk in the long run.
Insurance policies may seem like easy savings, but policy changes can have long-lasting effects
Small business owners are reconsidering their insurance policies as a way to manage their expenses in anticipation of the anticipated economic gloom, with 84% saying they have reviewed or plan to review their insurance policies soon. As they seek to reduce operating costs, 51% of business owners say they would be likely to reduce their business’s current insurance coverage or cutback limits in the event of a recession. That may be because 52% expect their premiums to increase over the next six months.
“With so many small business owners considering changes to their insurance, it’s surprising that only 29% of owners have contacted their agent to discuss their policies, especially since inflation and supply chain issues continue to increase repair costs and times“, Coleman said. “In these conversations, business owners should ask questions and consider how lack of coverage or appropriate limits might impact their operations in the future. Making decisions and updates without talking to an agent could thwart attempts to cut costs. »
Survey methodology:
Nationwide has partnered with Edelman Data & Intelligence to conduct a 15-minute national online survey of 401 small business owners, defined as sole or part owners of businesses with 1-50 employees and less than $10 million of annual income. The survey was conducted September 6-19, 2022. As a member in good standing of The Insights Association as well as ESOMAR, Edelman Data & Intelligence conducts all research in accordance with local, national and international laws as well as all the steps. Research standards and guidelines.