Small businesses nationwide are being impacted by the interrelated challenges of rising inflation, supply chain bottlenecks, and a tight labor market — and that means price increases are on the way.
Two-thirds of small business owners survey plan to increase prices in the next three months, according to a survey with 541 small business respondents by the National Federation of Independent Business.
"There's discussion about increasing prices due to strictly the inflationary nature of our current economy," Jon Hepner, co-owner of Prairie Rivet, a small business manufacturing company in Wisconsin, told Yahoo Finance.
Hepner explained he's increased prices twice in the last year, "it matches where the market is going to some degree because we've kind of been concurrently increasing prices versus waiting for inflationary pressures to then increase it."
Prairie Rivet is not alone: About 40% of U.S. small business respondents intend to raise selling prices by 10% or more, according to the survey. Another 47% of small firms are planning increases of 4% to 9%, the survey found. With inflation, running at the fastest pace since 1981, the report suggests many businesses are planning increases that are above the current rate of national inflation.
The Federal Reserve has indicated it plans to raise interest rates as a way to curb inflation. However, small employers still have a few options at their disposal other than passing along higher input costs onto customers, according to the NFIB report.
"Small employers must absorb these costs to keep their business operating and use various strategies to do that," the NFIB stated "The main tool of course is to raise prices for goods or services, passing higher input costs on to their customers."
The main drivers of higher expenses cited by operators were the cost of inventory, supplies and material, as well as fuel. Inflation started to show as an issue for small business owners in the summer of 2021, the NFIB said.
"The cash flow necessary to be purchasing the right amount of raw material so far out from the date that we're going to consume it and then be able to actually build a customer for it or essentially inventorying more and more raw material than we had in the past," Hepner said. "And that really puts cash flow constraint into perspective."
It's a novel experience to those who were not in business in the early 1980s. The NFIB found that inflation is having a substantial impact on 62% of respondents while almost a third have had a "moderate" impact. No respondents reported that inflation had no impact on their business.
Hepner also noted that "finding quality labor" has also been a challenge.
"We interview so many different people for positions and so many of them just don't fit what we're looking for," Hepner said. "It's difficult operationally, I think for us, for a lot of others I've spoken with to meet the demand ...with scarcity and labor."
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv