To understand how small businesses are being tormented. First, we need to get grip on what exactly is inflation and how it works? Inflation estimates the increase in the price of goods and services over a specific period. It often occurs when the production cost increases. Demand is another factor contributing to inflation because consumers’ demand for products and services makes them vulnerable and pay more for the respective product or service. The consequences of inflation can be seen in many areas. For example, it can be seen affecting the economy, businesses, big or small, exchange rate, unemployment, stocks, wage, and even the common man. But now, let’s find out how does inflation affect small businesses, and what measures are taken to combat its outcomes?

effects of inflation on small business
effects of inflation on small business


Every small business, anywhere in the world is affected by the surge in inflation. Inflation is by far number 1 on the list of concerns of the owners of small businesses. Small businesses are taking all their expenses into account just as they steer for high inflation. To battle inflation, many small businesses are compelled to increase costs, slim down their profit margins and raise their prices. Inflation is not just targeting a specific sector, the consequences of a surge in inflation are being endured by every small business. Irrespective of size, sector, region of the country, and scale every small business is impacted. A survey was conducted by the NFIB, it was found that approximately 22% of respondents reported that inflation. As a result of both inflation and the pandemic, it is reported that all small businesses have increased their prices by 15% – 30%. According to the Bureau of Labor Statistics, the inflation delineated in 2021, was twice more than what was evident in 2020.


As stated, small businesses are compelled to raise their prices in order to combat inflation. The most recent event where my example can be practically observed is the COVID-19 pandemic. The World Health Organization (WHO) declared the outbreak of Public Health Emergency, internationally on 30th January 2020. Since then, it was a very challenging period for small businesses established all over the world. The outbreak of coronavirus was not just a health crisis, but also a major economic shock, and that too, internationally. Because of the pandemic, the production cost reached its peak, as a consequence of which, inflation occurred. Since the cost of raw materials for products escalated, the owners of small businesses also had to increase their prices to balance the equilibrium of their profit and loss scale.

According to the article written by Thaddeus Swanek, to cope with inflation, an estimated 67% of small businesses have increased their prices. The whole situation of the pandemic was a huge and demanding hurdle for the owners of small businesses. Just as they were about to recover from the pandemic, a surge of inflation came their way. Neil Bradley executive vice president and chief policy officer at the U.S Chamber of Commerce said, “Having survived the pandemic, now small business owners are being hit with surging inflation. It limits their purchasing power and forces small businesses to raise their prices and absorb higher costs within already thin margins.” Many small business owners’ reactions to increased inflation are increasing the prices for the consumers.


Taking everything mentioned into account, the rise in inflation means a rise in prices. The owners of small businesses have no option but to increase their price rates to combat inflation and manage their profit margins. It is evident by many reports that during the pandemic, when inflation spiked, the rates of every small business increased by 15% – 30%.


Get registration and enrolled in our courses. Get your Diploma.

News & Events

Related Blogs


%d bloggers like this: