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Tighter profits

Because inflation is so severe now, increased prices aren't
equating to increased profits. In many places, increased
prices are barely enough to reach a breakeven point; in
some places increased prices are resulting in even tighter
Runaway inflation profit margins for SMBs. SMB owners typically already
operate on razor thin margins. Inflation exacerbates that.
A lot of SMB operations will have a tough time staying
a wrecking ball for open if inflation continues to worsen, no matter how high
they raise prices.
many SMBs Tighter inventory

inventory. As mentioned, supply chain disruptions have
By Chad Otar SMB owners also anticipate greater problems with
Lending Valley impacted all aspects of industry worldwide, including
in America. Many SMB owners are having to maintain a
nflation is on everyone’s mind, but especially on the bare-bones inventory, shuffle around offerings, and even
minds of small and midsize business (SMB) owners. streamline products and services in hopes of keeping
We are experiencing one of the tightest economic things in stock. The just-in-time infrastructure we built
I situations in America’s history. Inflation is a run- around the world was a modern marvel. But everyone
away train, blowing past historic rates to levels we haven’t is discovering how fragile it can be in the event of a
seen in decades—and it shows no sign of slowing down. systemwide shock.
Customers squeezing for more value
SMBs were already feeling a crunch from pandemic-
related disruptions. They were told inflation would be One major challenge SMB owners face in 2022 and beyond
transitionary (it wasn’t). Now, with the Federal Reserve is meeting customer pricing expectations while keeping
raising rates in March 2022—for the first time in two their businesses open. Everyone is hurt by inflation,
years—SMB owners know they're in for a bumpy ride. and everyone resists paying higher prices. There’s only
And I'll dig into that in this article. so much extra that people are willing to pay, especially
when inflation continues apace. This forces businesses to
Prepping for the long haul operate on even tighter margins, often barely breaking

According to a 2021 Business.org survey, SMB owners even. That’s no way to build a business—especially in the
anticipated some inflation—with only a small amount middle of the most competitive business environment in
anticipating it was going to get worse as 2022 rolled human history.
around. Eighty-nine percent of respondents said they had
raised prices slightly since the beginning of the pandemic; Customers are always hunting for the best value; now
45 percent reported they’d increased prices by 20 percent. they're especially price conscious. SMB owners are seeking
Now, SMB owners are preparing more aggressively for ways to navigate these desires, squaring them with their
the long haul of runaway inflation. That means taking a economic and business realities, and finding ways to
handful of big steps many couldn’t have imagined before weather this storm until we come out on the other side.
2020.
Note: The following resources were used in researching
Increased costs this article:

SMB owners are preparing for significantly higher costs • www.forbes.com/sites/edwardsegal/2022/03/31/recent-
across the board. Supply chain disruptions, lockdowns, rise-in-inflation-affects-a-growing-number-of-small-
strikes, labor unrest and a very tight labor situation businesses-survey/?sh=5fb289ae2121
have all led to significant cost increases for SMBs. Large • www.essence.com/news/money-career/business-
businesses have been hit by many of these same increases. owners-are-struggling-inflation/
But because they operate at a bigger scale, they are able to • www.gobankingrates.com/money/business/17-percent-
absorb those increases better than smaller businesses can. small-businesses-fear-going-out-of-business-in-2022-
Increased prices how-they-can-combat-inflation-retain-employees/

In the long term, SMBs can't paper over cost increases.
Prices will increase. Sometimes significantly. Imagine Chad Otar is CEO of Lending Valley Inc. For information about the
the group of SMB owners queried in 2021 being surveyed company, please visit www.lendingvalley.com. To reach Chad, send an
again in early 2022—a lot more than 45 percent would be email to chad@lendingvalley.com.
bumping prices 20 percent or more.
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