As the Federal Reserve continues to raise interest rates and inflation soars, small businesses are struggling. Many Harrisonburg businesses have been grappling with rising prices, including rising employee salaries and hourly rates, along with the current labor shortage. These added stresses are hurting small businesses around the country.
Despite an increase in job openings, labor shortages remain a persisting challenge for businesses across the board, and small businesses carry the heaviest burden. According to the National Federation of Independent Business (NFIB), 49% of small business owners reported difficulty in filling job positions, and 21% reported issues with labor quality. Ninety-one percent of business owners reported “few or no qualified applicants” for job openings. Many are raising employee wages in order to retain workers, which can put an extra strain on small businesses’ financial situation.
Kayla Martin, the general manager and pastry chef at Bella Gelato and Pastries, said that after the pandemic she struggled to find employees, but now her business is grappling with a different issue, one that small businesses across the country are dealing with — a lack of qualified job applicants.
Currently, Martin is searching for a new baker but hasn’t received any qualified applicants. Unlike baristas, who are relatively easy to find and train, she said bakers are more specialized and must be experienced.
The costs of doing business are increasing exponentially, including the soaring price of inventory and the price of transporting and distributing business’s products. Unlike large companies, many small businesses don’t have the means or money to fully combat rising interest rates that increase the price of their inventory according to Business News Daily. The increase in interest rates will also affect small businesses’ potential growth, which will be much slower than normal — this is especially true for startups.
According to Kabbage, in the U.S., small businesses revenue increased from July 2021 to July 2022 by an average of 87%. However, this increase in revenue coincides with an unfortunate downturn in profits by 4% over the same time period — small businesses are making more money, but more of that income must be put back into the business, leaving less profit for the owners. This often leads businesses to raise prices and cut certain products or services.
Martin said that before the pandemic, Bella Gelato and Pastries hadn’t raised prices for several years, but now that distributors are increasing the cost of products, Martin said she’s had to raise prices two or three times since the pandemic.
Chris Straub, the manager at Midtowne Market, said his business struggles with rising prices as well.
“Product prices have certainly gone up, and they’ve gone up a lot and they’ve gone up frequently,” Straub said. In the last year prices have risen significantly more than previous years. He noted that the price of cigarettes and beer specifically have increased.
However, Straub said he hasn’t had an issue with labor shortages since the end of the pandemic and is now fully staffed with plenty of applicants.
While businesses can’t control rising interest rates, there are some things small businesses can do to combat inflation. In a ZenBusiness article by Janet Attard, she gives nine tips for small business owners: pay attention to cash flow, reduce costs, increase prices, create product bundles, eliminate products or services that aren’t profitable, increase productivity, market to increase sales, target profitable customers and get creative.
With so many small businesses in Harrisonburg, students and residents can help support them in multiple ways. Instead of shopping online or ordering from a name brand retailer, consider buying goods from local businesses that offer the same products. Become a loyal customer at your favorite local farmers market or hair salon. Any support you can provide helps small businesses in the community.
Businesses across the country are feeling the effects of inflation and labor shortages, and Harrisonburg is no exception. As distributors raise prices, small businesses are forced to raise their product prices as well. The added stress of finding qualified workers leaves small businesses at the hands of the current state of the economy. The only hope is that as the Fed raises interest rates, inflation will slowly decrease.
Contact senior writing, rhetoric and technical communication major Emma Seli at firstname.lastname@example.org. For more editorials regarding the JMU and Harrisonburg communities, follow the opinion desk on Instagram and Twitter @breeze_opinion