Small Biz Outlook 2023

Small Business Expo in Cincinnati is in the rear view mirror, but those who attended were determined to make this a healthy business year, in spite of recent dark clouds. There’s one thing small business does well —we’re nimble and very bullish about our businesses.

Since 1973, the National Federation of Independent Business (NFIB) has tracked and recorded Small Business Economic trends via questionnaires mailed to their members. We thought it would be helpful to share a few of the numbers.

Of note for 2023 is their Small Business Optimism Index that shows an overall Index of 89, after their 49-year average of 98. The reason for the dark clouds? Inflation!

Stressed businessman looking at laptop screen in modern office.

While the survey tracks labor markets, capital spending, sales and inventories, compensation and earnings, borrowing and credit markets, inflation was what hit small business owners the hardest. 

This Inflation information should be informative for our readers to measure their performance compared to the rest of the small business world:

The net percent of owners raising average selling prices decreased 4 points from March to a net 33% seasonally adjusted, the lowest since March 2021. Unadjusted, 12% (up 1 point) reported lower average selling prices and 48% (down 2 points) reported higher average prices. 

Price hikes were most frequent in construction (59% higher, 7% lower), retail (59% higher, 8% lower), wholesale (54% higher, 14% lower), and finance (52% higher, 5% lower). 

A net 21% of small business owners plan price hikes (down 5%).

Consumer spending increased, but consumers were purchasing product from inventory made in prior quarters. Those small bank failures that made the news were not due to bad loans but to poor risk management! Even as the Government was pouring massive Covid relief into the economy, banks allowed those deposits to be withdrawn in 24 hours.

For those who enjoy tracking where your small business stands compared to other small businesses, read the entire report (Copyright NFIB Research Center publication: NFIB Small Business Economic Trends, April 2023).

Easter’s Lessons for Business

This year, the month of April ushers in the celebration of Easter. Whether Christian or otherwise, it’s a happy day full of new life represented by baby chicks, decorated eggs, organized and disorganized egg hunts, and bunny rabbits. For believers, it’s 40 days of prayer and fasting culminating in a procession of Good Friday, Holy Saturday, the Easter Vigil and finally Easter Sunday.

Tulips and Easter eggs in grass under a sunny blue-green sky.
Easter Season and Springtime are both Great Times for New Ideas

Christian traditions have their own special emphases for Easter, but most Americans of all walks and beliefs celebrate with lamb dinners, eggs, ham, cheeses and breads. Children have been decorating Easter eggs, and grownups have been hiding the same for the children to find since the 13th century.

In the early 1870s, children would gather on the grounds of the U.S. Capitol Building to roll their eggs and play on Easter Monday. Then in 1878, First Lady Lucy Hayes (wife of President Rutherford B. Hayes) held the first annual Easter egg roll on the White House lawn, a custom that has survived to present times. There’s a story about one small boy who complained to President Hayes that the children would no longer be allowed to roll eggs near the Capitol Building because it was ruining the grass. Then he asked the President for permission to use the White House lawn. Obviously, the President agreed and the traditional White House Easter egg rolls continue to this day. Business lesson: never be too shy to ask for what you want.

As small business owners, we can celebrate the season with Game Changing ideas:

  • Determine the values and technologies that can remove barriers to scaling your business.
  • Develop a clear vision of your client base or portfolio and write a laser-focused value proposition based on where you are now compared to where you want to be next spring.
  • Dedicate safe but significant funding to your ideas once you can demonstrate viability and expansion.
  • Use technologies to capture data that will help you continually improve performance and delivery quicker responses to customer/client concerns.

Think resurrection and have a safe and Happy Easter season.

Managing Inflation for Small Businesses

With inflation at a 40-year high and the Feds pulling their rabbit out of the hat to battle inflation to slow the economy (raise the short term interest rate) through manipulation of its monetary policy, it may take a recession to bring prices under control. And all this on heels of a worldwide pandemic, employee issues, soaring fuel prices and supply chain woes.

While it’s painful, it’s not new. Inflation can be considered a “by-product” of money. In ancient Rome, when the emperor couldn’t pay his bills, he decreed that the (solid) silver denarius be made as only a copper coin thinly plated in silver. With the coin now having less value (less silver) Roman merchants demanded more and more denarii in exchange for goods and the coin’s intrinsic value declined. 

When the American Revolution started, the Continental Congress could not afford to buy weapons, outfit soldiers, and pay for a full scale war…so they printed fiat money — paper money made legal tender simply by government decree. Like Bitcoin without high tech.

Just last March, the U.S. Chamber of Commerce surveyed random small-business owners to discover that 85% of respondents said that inflation is a concern, and 1-in-3 respondents rank inflation as their #1 concern. A full 63% have supply chain issues, and 67% have raised prices in response to inflationary pressure.

The numbers were similar across the country and spared no geographical regions or business sectors — it appears we are all in this together.

Because it costs us more to run our business, we need to raise prices to customers in order to offset the increase, and we must hunker down and accept tighter profit margins to remain profitable over time.

Eventually, business should return to normal. Before it does, here are suggestions from the experts at Forbes

  • Resist the urge to wait it out.
  • Review your gross profit margins on a product or service basis.
  • Look for opportunities to save.
  • Have a process to increase prices as needed to maintain adequate profit margins.
  • Resist the urge to be a martyr.

Be advised to view pricing as a “formulaic decision” — based on target profit margins that are sustainable. The endgame is this: price your goods and services to allow the business to continue to grow and scale.” Adapt, don’t fail.