The company in Richmond, Virginia, helps people to declutter and downsize their homes and unpacks after moves and renovations. Their paychecks were being impacted by the high cost of gas to travel to their clients’ homes, sometimes up to an hour away.
The business immediately redistributed funds in the budget and gave $25 gas cards to team members who traveled. The temporary solution was not permanent. Godding didn’t see the problem disappearing soon. Abundance Organizing increased service rates by 25% just weeks later to increase employee pay.
As the impact of coronavirus pandemic recedes, the demand for services is still high. However, it’s not clear how long this will continue after two already turbulent years.
The rate of inflation has increased 8.5% in the last year. This is the highest annual pace of price rises since 1981. Gas prices have risen nearly 50% in the past year compared to a year ago. The cost of groceries has risen 10%. Russia’s invasion in Ukraine only exacerbated the problem, as Ukraine was already having trouble keeping up with high demand during the coronavirus pandemic.
While large companies report record profits last yea, and many studies suggest that it is driving up prices, smaller businesses are feeling the pinch.
A new survey by Goldman Sachs 10,000 Small Businesses Voices found that 80% of small-business owners believe their business’ financial health is in decline due to inflation over six months. 67% of those surveyed have raised wages to retain workers, while 61% have increased wages in order to attract new employees. 60% of those surveyed said that they have offset cost increases by increasing prices to pass it on to the consumer.
According to 73% of small-business owners, rising energy costs – which have risen 32% over the past year – are having a negative effect on bottom lines.
91% of small-business owners believe that broader economic trends such as inflation and supply chain problems, as well workforce challenges, are affecting their business. While the U.S. economic system is strong according to multiple measures, 56% small-business owners believe that the economy has declined since January.
Small businesses are facing inflation, which is adding to the already difficult problems they already face. The survey revealed that small-business owners still cite hiring and retaining qualified workers as their top challenge. There are more than 11,000,000 job openings as of February, which is a record.
This is a problem Godding faces. Abundance Organizing, which employs 16 people and pays $15-35 an hour, is actively seeking to hire. However it already knows that it will need to make changes in order to remain competitive.
Godding stated, “In order to compete with corporate America,” adding that $12,000 is the minimum wage for an employee. Godding acknowledged some of the benefits offered by larger companies that her company cannot.
This has led to a story of two recoverys, according to small-business owners. 88% of respondents said they have struggled in comparison to larger companies in their communities. 42% of them reported losing employees to larger businesses paying more. 70% of respondents were worried that employees would leave because they believe larger businesses offer better pay.
Joe Wall, national director for Goldman Sachs’ 10,000 Small Businesses Voices, stated that “the competition on wages can be intense.” However, he believes there is an even greater competition when it comes to benefits.
86% of small-business owners believe Congress should act to make it easier for smaller businesses to compete with larger corporations. Wall stated, “They are not asking for handouts. They’re asking to have access.” Wall stated that the Small Business Administration has not had its authorization renewed in over 20 years. This could be a step to modernize and streamline programs.
The record profits that are being seen by large corporations is a blow to small businesses after two very difficult years of the pandemic.
Godding stated, “It just seems too unbalanced.” “We aren’t making that much profit at my company.”
Small-business owners aren’t optimistic that inflation will ease anytime soon. Only 5% of those surveyed believe that it and the supply chain problems will recede within the next six-months.
