I’m a Small Business Owner: 5 Reasons I’m Worried About the Economy
Written by
Jennifer Taylor
Edited by
Amber Barkley
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Small businesses are the core of America, but owning one isn’t easy. The current state of the economy has many entrepreneurs on edge, hoping for the best.
There are 33.2 million small businesses in the U.S., according to the U.S. Chamber of Commerce. This constitutes 99.9% of all U.S. businesses.
As a whole, U.S. residents don’t feel like the economy is currently in a great space. Specifically, nearly 70% believe the economy is getting worse, according to a poll conducted by the Suffolk University Sawyer Business School.
Many small business owners share this sentiment.
As of the third quarter of 2023, just 33% said the U.S. economy is in good health, according to the U.S. Chamber of Commerce. However, 66% report that their business is in good health and 72% say they are comfortable with their cash flow.
John Lin, owner of JB Motor Works, a car repair shop in Philadelphia, said he is worried about the economy. He shared the five main reasons behind his concern.
Rising Costs
“Sharp increases in the prices of raw materials, car parts and other commodities essential to my business are a major concern,” Lin said. “We strive to keep our services affordable for our customers, but rising costs might force us to reconsider our pricing strategy.”
Lin certainly isn’t alone in his concern about rising costs.
Approximately one-third — 33% — of small business owners are stressed about rising costs, according to Truist’s 2023 Small Business Survey. Even more problematic, 73% of small business owners experienced cash shortfalls this year.
Labor Market
“There’s a shortage of skilled auto mechanics in the market,” Lin said. “With the increased cost of living, it’s become more challenging to attract and retain talent without significantly increasing labor costs.”
Many other small business owners are also feeling the impact of a tight labor market.
More than half — 53% — have added benefits and perks to retain talent, according to the Bank of America 2023 Small Business Owner Report. This includes adding additional benefits and perks to existing compensation packages, including remote work — 34% — cost-of-living bonuses — 34% — and more vacation time — 33%.
Consumer Spending
“Given that many families are dealing with financial uncertainty, discretionary spending is being cut down,” he said. “This affects businesses like mine as car repairs and maintenance can often fall into the discretionary spending category for some people.”
Exactly what to expect from consumer spending remains to be seen.
In September 2023, the unemployment rate was 3.8%. This is unchanged from August 2023, but overall, the highest it’s been since February 2022.
On the other hand, the inflation rate — not seasonally adjusted — was just 4.1%. This is the lowest it’s been since September 2021, when it was at 4%.
Supply Chain Disruptions
“The pandemic has had a significant impact globally on production, leading to supply chain disruptions,” Lin said. “The delays in getting spare parts affects not only our service delivery timelines but also customer satisfaction.”
Hopefully, the worst of supply chain issues are in the past. In April 2022, 36.1% of small businesses reported domestic supplier delays, according to the U.S. Census Bureau. However, this number declined by more than half to 14.5% by July 2023.
Potential Impact of New Policies
“With every new administration and changes in government, new policies and regulations are usually introduced,” Lin said. “Some of these potential regulatory changes can have a significant impact on small businesses like mine.”
The 2024 presidential election is just around the corner, and small business owners have a lot at stake. Like Lin now, this demographic has historically paid close attention to the presidential election in the past.
In 2020, 60% of small business owners said they paid “a lot” and 30% said they paid “some” attention to the presidential election campaign, according to a Gallup poll.
Only time will tell what’s next for the economy, but Lin is committed to riding out any wave that comes his way.
“These are tough times indeed, but as a local business owner, I always try to adapt and find ways to keep servicing our customers better and more efficiently,” he said.
Due to the COVID-19 pandemic, small business owners have had an especially rough few years. From business shutdowns and restrictions to inflation slowing consumer spending, things haven’t been easy as of late.
Only time will tell what’s next for the economy. Hopefully, the worst is behind them and the things will soon take a turn for the better.
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