The impact of inflation is highlighted in a new global report by Meta, the parent company of Facebook. According to the report, inflation and rising costs of inputs are emerging challenges for most Small and Medium-sized Businesses (SMBs). The analysis of SMBs in 30 nations found that inflation was a major concern for SMBs particularly those involved in export.
Impact of Inflation on Small Business – Meta Report
Almost a quarter (23%) of US-based small businesses reported an increase in their cost of inputs and raw materials in the past six months. This is in stark contrast to the global average of 45% of SMBs that were forced to shutter during the same period. The rise of inputs and raw materials have prompted 54% of SMBs globally to raise prices for their good and services by more than 5% in the past 6 months. While a further 9% of SMBs reported increasing their prices by more than 50%. In contrast, only 28% of SMBs in the US who felt the impact of inflation raised prices by more than 20% in the past 6 months.
Hard hit are SMBs engaged in exports of which only 30% report having sold goods or services internationally in the past five years. While only 15% of US-based SMBs reported succeeding in exporting their goods or services to other countries in the same period.
SMB Closures Slightly Down With More Reporting Higher Sales
Despite the higher costs for raw materials, the number of small businesses reporting closing up shops has actually gone down, albeit just slightly. Some 66% of SMBs in North America are confident that they will remain open for at least another six months. A healthy 80% of US SMBs in July 2022 said that they were operational or engaging in any revenue-generating activities. Only 18% of SMBs in the US reported that they were closed in July 2022 down by 3% from January 2022. This is slightly lower than the global average of 19% of small businesses around the world reporting being closed.
Sales have also shown indications of improvement since last year. Some 37% of SMBs in the US reported that their sales in the past 30 days were higher when compared to the same month last year. While 35% of US SMBs reported their sales being lower. However, only 16% of SMBs reported that they expect to generate more than 50% of their annual revenues between October and December of 2022. While 29% of expect to see challenges related to a lack of customer demand in the next few months.
Employment has Increased Globally, but the Trend has not Been Consistent Across Countries
In the US some 85% of SMBs reported increasing (18%) or stable (68%) numbers of staff. When it comes to challenges with hiring and retaining talent only 15% of US SMBs said they had reduced the size of their workforce in the past six months. This is down from 24% in January 2022. Interestingly the state of Ohio was found to have the largest proportion of SMBs increasing staffing in the past six months at 25%. Notably, in a number of states, such as New York and Tennessee, more SMBs reported cutting their manpower than adding to it.
Globally close to a quarter (24%) of SMBs reported increasing their staff in the past six months, up from 11% in January 2022. Out of which almost half (45%) of SMBs in Sub-Saharan Africa reported increasing numbers of staff in the past six months, the highest proportion of all regions. Closures have fallen by 2% since the January 2022 report, and the proportion of SMBs in the construction sector report being closed has increased by 3%.
Other Highlights from the Global State of Small Business Report
SMBs have facilitated growth by modifying their business tactics – offering increased benefits and flexibility for workers along with investing in digital transformation. As a result, some 41% of SMBs reported generating at least 25% of their sales through digital channels in the past 30 days. Out of which 55% have said that they are using digital tools for advertising. The report also dedicated a section to spotlighting how minority-owned SMBs fared, particularly in regard to embracing digital tools. Some of the other highlights of the report include:
- Some 60% of US minority-led SMBs are using digital tools for advertising, compared to 53% of other SMBs.
- Around 45% of US minority-led SMBs are generating at least 25% of their sales through digital channels, as a proportion of total sales in the past 30 days, compared to 39% of other SMBs.
- Roughly 19% of minority-led SMBs reported expecting to generate more than 50% of their revenues between October and December 2022. This compares to 13% of other SMBs.
- Some 76% of minority-led SMBs reported that they were operational or engaging in any revenue-generating activities, compared to 84% of other SMBs.
- Nearly 43% of minority-led SMBs reported that their sales in the past 30 days were higher when compared to the same month last year. This compares to 36% of other SMBs