COMP NEWS –  With inflation heavily impacting the world, small businesses are being forced to pass along rising costs to customers to stay profitable.

The latest Consumer Price Index reading, the highest in four decades, isn’t the only sign that inflation is extending rather than giving up its hold over the U.S. economy in 2022. An increasing number of American small businesses say they are now passing on higher costs to customers, or soon will be forced to make that decision.

Nearly ¾ of small businesses reported that they are experiencing rising costs due to inflation. Because of this, nearly half of all small businesses report that they are raising their prices to pass along the rising costs.

While the 74% of small business owners who say they are experiencing rising costs of supplies is virtually unchanged from Q4 2021, according to a new CNBC/SurveyMonkey Small Business Survey, the number of businesses passing on costs to customers has risen to 47% in the first quarter, up from 39% in Q4 2021. And another 32% indicate they will have to raise prices soon if inflation persists. Sticky inflation is their expectation. Over eighty percent of small business owners expect inflation to still be a problem six months from now (55% say that is “very likely”), according to the CNBC|SurveyMonkey data.

Many small businesses are having to buy larger amounts of inventory to offset the rising prices of their supplies. One business is buying almost four times the amount of inventory that they would normally purchase.

Nana Joes Granola stocked up on ingredients and bought them at higher volumes to get lower pricing as demand outstripped supply and logistics issues worsened. The loading up on inventory is “more of a stopgap right now,” Pusateri said, but she expects it will probably become a long-term business issue. Her firm held $94,000 of inventory at the end of 2019, but by the end of last year, that had risen to $327,000.

Inflation is impacting small businesses more and more, and customers will eventually suffer the same circumstances businesses are. Small businesses are already passing along costs to customers, and larger businesses will soon follow.

To read more about the impact of inflation on small businesses, click here.

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