Main St. Small Business Sees Inflation ‘Hands Down’ as Biggest Challenge

Recent PYMNTS’ research found that inflation was 2022’s biggest challenge for small- to medium-sized businesses (SMBs).

Main Street SMBs make up much of the U.S. business landscape. As a result, their performance typically serves as a good litmus test for the current market environment.

But the economic outlook remained regrettably glum for the majority of Main Street SMBs, with 64% expecting the U.S. economy to enter a recession.

A shade under half of those surveyed for PYMNTS’ “Main Street Health: Q4 2022” report, or 41%, think a recession is already happening, while one in five businesses believe a recession will come in the next six months.

Those with a mixed online and physical presence (62%) are more optimistic about weathering the economic downturn given their blended “phygital” revenue streams.

Of note, consumers surveyed by PYMNTS separately tended to share the same sense of impending economic malaise as SMBs do, with an identical 64% expecting a recession.

This could be because both consumers and Main Street SMBs, to the detriment of their respective bottom lines and budgets, as well as overall confidence, are being hit by the twin specters of inflation and rising costs.

PYMNTS’ research finds that as of October, 6.4% of firms considered themselves at risk of bankruptcy, a slight year-over-year increase from 6.3% in November 2021.

Inflation is the leading concern for businesses, with more than 39% saying it represented their greatest challenge over the course of the year. More than three in four SMB owners think inflation will take over a year to return to normal.

Some industries struggled more than others when dealing with inflation. Professional services firms were less troubled by inflation – likely due to their relatively minimal need for inventory and other goods affected by rising costs.

Firms in the construction sector were the most likely to be worried about inflation, with 55% considering it their most relevant challenge. This was followed by hospitality at 43% and retail at 42%.

Accordingly, 71% of construction firms report they’ve increased prices, followed by retail trade firms at 67% and hospitality businesses at 63%.

There were also many less common but still major challenges faced by businesses in different industries.

For more information on what’s top of mind for Main Street SMBs, download PYMNTS’ informative free report, “Main Street Health: Q4 2022.”