U.S. small businesses are raising prices, negotiating with suppliers to lower costs and prioritizing customer relations to increase revenue amid the tumultuous economic environment.
Thus far, small business owners have proven to be resilient despite inflationary pressures and a challenging labor market. Most small business owners, about 80%, are confident that they can withstand a potential U.S. recession, acceding to the Kabbage from American Express' Small Business Recovery Report, which tracks the recovery trends and growth outlook of U.S. small businesses.
Brett Sussman, vice president head of sales and marketing for Kabbage from American Express, told FOX Business that after the pandemic struck, small businesses found a "greater sense of resilience and preparedness to be successful in the future despite economic turbulence."
So far, they have managed quite well, with revenues for U.S. small businesses rising 87% on average between July 2021 and July 2022, according to the report.
"It's often said that necessity is the mother of invention. For small business owners, the pandemic was really the mother of reinvention," Sussman said.
When the pandemic gripped the world and effectively altered business operations, small business owners started "digitally transforming by selling online," Sussman said.
They focused on their distinct brand to stand out from competitors and expanded their marketing. They also tried out new digital transformation tools and focused on building a mobile app.
Those tricks are "working from a revenue perspective," but small businesses are not completely immune to inflation, which is sitting near its highest level in 40 years.
Despite having large revenue increases, they also saw a "slight difference in profitability between the same time frame," Sussman added.
According to the report, 75% of small business owners admitted that they are feeling the effects of inflationary pressures, and more than half expect to see this continue until next summer.
Now, more than 30% of small business owners surveyed said they are raising their prices for products while 22% said they are aiming to negotiate better deals with their suppliers. Thirty-three percent said they are focusing in on strengthening customer loyalty to help increase future revenue.
They are also heavily investing in analytic and customer relationship management tools to better understand and market to their best customers. Part of the businesses' success has been using social media marketing and appealing to their local communities, Sussman said.
The other big challenge for small businesses is hiring and retaining talent.
Just under half of all small business owners reported inflation is impacting their labor market and forcing them to compensate for higher health care, enriched employee benefits and more frequent pay raises, according to the data.
Nearly half of all small businesses began offering flexible work options to stay competitive.
It’s hard enough to find the "right talent for these small business owners, so the last thing they want to do is lose some of their existing talent," Sussman said.