Inflation has been a hot topic since the pandemic started in 2020. For years, consumers and businesses have battled rising rates spurred by supply chain disruptions, labor shortages, and increased demand for goods and services. 

Now, after eight straight months of downward trajectory, there are signs of light—but whether inflation is finally leveling out for good is still up for debate. For instance, Dr. Paul Mueller, Associate Professor of Economics at The King’s College, believes the inflation rate may actually be lower than the Federal Reserve states. This is because they track the Consumer Price Index (CPI) year-over-year rather than over a 6-month period. He also said the use of rent data in the CPI suffers from a 12-month lag.

Regardless of where you stand on the subject, one thing is certain: small businesses across the country are still under water. And with a possible recession looming, they’re not quite ready to relax just yet. We talked to hundreds of our customers to get a true sense of the impacts inflation has had—and continues to have—on American small businesses. Here’s what we heard.

89% of small businesses are feeling the financial weight of inflation

Inflation may well be falling, but owners across the country are still feeling its effects. In fact, it’s one of the biggest challenges they’re facing this year:

  • Cash flow (52%)
  • Inflation (48%)
  • Revenue (45%)
  • Debt (28%)
  • Interest rates (19%)
  • Supply chain disruptions (16%)
  • Staffing (14%)

The biggest culprit? The rising cost of inputs that make it more expensive to run their businesses. As a result, tight operating balances are made even tighter, leading to lower margins and even losses.

  • 71% are concerned about increased cost of inputs
  • 49% have experienced reduced demand for their goods or services
  • 36% reported increased overhead costs, including rent and utilities
  • 18% are paying increased wages to staff
The Impact of Inflation on Small Businesses

To combat inflation, small businesses are looking inward

52% of small businesses are struggling with cash flow, while 45% are experiencing reduced revenue. But instead of raising their prices to maximize their margins, most small businesses are reevaluating their own spend management systems.

In fact, 17% recommend cutting costs to combat inflation:

  • “Reassess everything and run lean where you can without affecting quality.”
  • “Review all expenses to determine what supports business continuity against expenses that are not critical to operations to see where costs can be cut.”
Small businesses look inward

Specifically, 4% of small businesses suggest negotiating costs with suppliers or shopping around to find better deals:

  • “Review potential new product sources and vendors for price and quality comparisons. You may find a local supplier to offer better rates.”
  • “Be proactive. Utilize forward purchasing contracts to lock in favorable pricing. Discuss price reductions with suppliers in exchange for volume and time commitments.”

Small businesses are hesitant to pass costs on to customers

Recommend Raising Prices

Despite the challenges they’re facing, only 4% of small businesses recommend adjusting prices. Instead, they’re doubling down on the customer experience:

  • “Charge what you’re worth but don’t over charge. Always be mindful of your customers’ needs.”
  • “Be positive, focus on excellent customer service, and continue to do business with an abundance of integrity.”
  • “Try to avoid raising your prices and cut back on other expenses to stay profitable.”

This could be because they think raising their prices will turn customers off. In fact, reported that 37% of small businesses have received customer complaints over inflated prices.

Financial expert Rhett Stubbendeck, CFO at LeverageRx, however, suggests a balanced approach: “I think the best option is to abide by improvements in customer service to compensate for the increasing prices for products. This helps deliver a message to all customers that the business understands the problems they may face and will help them as much as it can.”

Not all businesses are impacted equally

The effects of rising inflation, though felt across the country, are more prominent in some areas than others. A business’s industry, region, or age factor into the impact inflation can have and how it affects its bottom line. 

For example, industries that are heavily reliant on the supply chain may feel the effects of inflation more acutely as delays, disruptions, and rising costs can impact production. In fact, more Commerce- and Construction-based businesses felt the impacts of inflation in the last year than any other industry:

  • 82% of Commerce businesses were impacted by inflation
  • 82% of Construction businesses were impacted by inflation
  • 81% of Public Service businesses were impacted by inflation
  • 79% of Financial and  Professional Services businesses were impacted by inflation
  • 79% of Media businesses were impacted by inflation

Similarly, businesses located in regions with high real estate prices may face challenges as inflation can lead to increased rents and property values:

  • 87% of businesses in the South were impacted by inflation
  • 78% of businesses in the Midwest were impacted by inflation
  • 76% of businesses in the West were impacted by inflation
  • 70% of businesses in the Northeast were impacted by inflation

Finally, older businesses that have been operating for many years may struggle to adapt to changing economic conditions and may be more vulnerable to inflationary pressures than newer, more agile companies:

  • 2019 or earlier (84%)
  • 2020 (74%)
  • 2021 (83%)
  • 2022 (75%)
  • 2023 (63%)
Not all businesses are affected by inflation equally

Small businesses remain optimistic about the future

Although 57% believe the economy will face a recession, more small businesses are optimistic than not about the future of inflation. And with new small businesses being formed every day, nothing can stop the drive and determination of the American entrepreneur.


We conducted an anonymous survey of 296 of our small business customers and analyzed the results to compile this report. This analysis was a cross tabulation of responses reported as comparisons of the percentages of respondents of the entire sample or demographic variables such as the business owner’s region, year of business launch, or industry. It is important to note that how inflation affected a business, whether the business is still feeling the effects of inflation, and optimism that inflation will no longer affect their business were a sub-sample of respondents who replied “yes” to “has your business felt the effects of inflation in the past year.” In all cases, reporting by percentages of a sample was chosen to facilitate comparison across different sub-sample sizes (e.g., regions). 

Our data was pulled from four different sources: