86% of Small Businesses Are Facing Economic Challenges
Small businesses are facing a multitude of economic forces that threaten to close down their operations in 2022. The omicron variant is one of the newest among several hurdles that have persisted into the new year, including supply chain issues, hiring difficulties and record-high inflation.
In Goldman Sachs’ 10,000 Small Businesses Voices survey, more than 1,400 small businesses were asked to identify the biggest challenges to their survival. The survey — part of an advocacy initiative aiding small business owners’ efforts for policy change — reveals that the overwhelming majority (82%) want the federal government to provide more emergency financial assistance as they weather a storm of major economic forces.
Omicron variant
In August, shutdowns caused by the delta variant threatened to force 57% of existing small businesses to close permanently. The businesses that did survive have since found themselves facing a growing list of challenges that are largely out of their control — omicron is now among the most significant threats to their operations.
Here's what small business owners report:
- 79% express concern over the ongoing pandemic, and the omicron variant in particular
- 71% say that a rise in COVID-19 and omicron variant cases has adversely impacted their revenue
- 37% say they’ve been forced to temporarily close their businesses or scale back operations due to recent rises in COVID-19 cases
Hiring difficulties
Record-high resignation rates are impacting small businesses, along with difficulties in finding staff who are willing and able to return to work.
In a mid-2021 survey from Kabbage, roughly a third of small businesses reported hiring challenges, for reasons that included candidates who didn't feel safe returning to work (29%) or couldn't come back due to child care or family care responsibilities (32%).
In the Goldman Sachs survey, respondents report that hiring difficulties persist — 97% of small businesses who are hiring even report that labor shortages are impacting their bottom line, up from 80% in September.
Inflation
As quit rates hit record highs, so does inflation — and survey respondents report growing concerns over its impact on their businesses:
- 84% say inflationary pressures have worsened since September 2021
- 76% shared that the financial health of their businesses’ has been hurt by inflation over recent months, a slight increase from 74% in September
- Only 10% say the federal government has done enough to solve inflation issues
The supply chain
In October, 80% of consumers who participated in an Oracle survey reported that they would stop buying from a brand entirely if they experienced delays or shortages in their orders.
But small businesses may find it particularly hard to compete with larger businesses amid supply chain lags. In the Goldman Sachs survey, 66% percent of impacted businesses reported that suppliers are favoring large-volume orders from big businesses over orders from small companies.
Here's what survey participants report:
- 68% of respondents report being concerned about ongoing supply chain constraints
- 69% say they’ve had their business revenues negatively impacted by supply chain issues
In addition, entrepreneurs overwhelmingly report that the federal government isn’t doing enough to help. While 86% support Congress reauthorizing the COVID-Economic Injury Disaster Loan (EIDL) program, there is currently no indication that the EIDL will be reauthorized; however, some expansion of financial relief for small businesses may be in store in the coming year.
Methodology: The survey was conducted by Babson College and David Binder Research on behalf of Goldman Sachs from Jan. 10-13, 2022. The respondents included 1,466 small business owners from 47 states and two territories; 58% were women.
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