Small businesses across the US are preparing to make “drastic changes” to how they operate as they struggle to cope with high inflation, according to research by Umpqua Bank.
The Oregon-based bank’s latest Business Barometer, covering small and medium-sized companies, highlighted that small businesses, a key customer group for US banks, are taking more risks in order to continue their growth and adapt to rising costs.
Umpqua’s previous surveys indicated how small businesses were “hesitant” to embrace major changes, due to having “fewer levers to pull”, the bank explained. However, in light of the pandemic and inflation, this mentality has changed.
The latest barometer showed small businesses were anticipating changes to in several trends, including pricing models, products and services, business expansion, digitizing for efficiency, acquiring other companies, or merging.
Alongside this, Umpqua found that small businesses were also aiming to increase recruitment in order to acquire personnel with diverse capabilities. Priorities in this area included generating new business, increasing staff pay and benefits, allowing remote work options, and finding new suppliers or partners to “manage supply chain impacts”.
Ashley Hayslip, head of community and business banking at Umpqua Bank, said: “Increasingly, small businesses now feel a sense of urgency to make changes to their strategy and operations, especially in response to rising inflation, which has a more immediate impact the smaller the enterprise.
“That sense of urgency can be turned into a competitive advantage for those businesses that pivot quickly and strategically.”
Taking more risks and adopting major changes did not always lead to a positive outcome, Umpqua said. The fact that many small firms needed to make drastic changes highlighted the concerns these companies have with growing inflation rates, the bank indicated.
Annual CPI inflation in the US hit 8.6% in May, according to the Bureau of Labor Statistics.