The main news
- According to the latest national agency survey, 70% of small business owners expect a recession in the next 6 months, but feel they are too few to deal with it.
- More than half are considering where to cut costs – some business owners are considering changes that could affect the job market.
- A risky business game, as nearly half of business owners surveyed said they would consider reducing their current insurance coverage to reduce operating costs.
In just two years, small businesses have weathered the global pandemic, supply chain crisis, labor shortages and inflation-driven costs. The latest Agency transfer survey Nationally, it shows that few will be relieved in the near future and are taking drastic measures to protect their businesses in anticipation of a downturn in the coming months.
The current economic climate is taking its toll on America’s small businesses.
Only 27% of small business owners think the current business climate in America is strong, and more than a third feel the same about their own region or city (36%). Their view of the future is even more dire, with 70% of small businesses predicting a recession in the next six months, but only 37% feel prepared.
The survey also shed light on how business owners have been affected by recent economic uncertainty:
- 6 in 10 small business owners say inflation and rising costs have negatively impacted them.
- 35% say they have been negatively affected by interest rate hikes.
- 4 in 10 (39%) say their business income has decreased in the past six months, with most declines as high as 30%.
Small business owners are looking for creative ways to protect themselves from economic uncertainty
Nearly 6 in 10 (58%) business owners have explored areas to cut costs in the past six months. Some of the more drastic measures include 38% of business owners using personal savings to fund their business and 22% canceling/postponing a major business investment. Perhaps most alarming are the cuts that could affect the labor market – some owners plan to either freeze hiring early (38%), or drastically cut staff/hours (23%) as they prepare for tough times ahead. Only 14% plan to hire new employees. Additionally, nearly 4 in 10 say they plan to give their employees a raise (42%) or bonus (41%) this year.
“Small businesses are struggling to stay afloat amid current inflation and labor market trends,” said Eric Coleman, SVP of Small Business Insurance at Nationwide. “If your predictions of a recession come true, getting back on track will not be easy. What’s worse is that the owners put their business at risk in the long run in their efforts to cut costs.
Insurance policies may seem like simple savings, but policy changes can come with long-term consequences
Eighty-four percent of small business owners have recently reviewed or plan to review their insurance policies, saying they are reconsidering them as a way to control costs ahead of the expected recession. When it comes to reducing operating costs, 51 percent of business owners say they may reduce their business’s current insurance coverage or reduce their cost-cutting limits in the event of an economic downturn. This is likely because 52% expect premiums to increase in the next six months.
“With many small business owners considering changes to insurance, especially as inflation and supply chain issues continue, it’s surprising that only 29% of owners are in contact with their agent. Manage maintenance costs and deadlines” said Coleman. “In those conversations, business owners need to ask and consider how a lack of coverage or appropriate limits will affect their operations in the future. Making decisions and making improvements without talking to an agent defies cost-effectiveness.”
Survey Methodology:
It partnered with Edelman Data & Intelligence across the country to conduct a 15-minute national online survey of 401 small business owners, defined as sole or part-owners of companies with 1-50 employees and less than $10 million in annual revenue. The survey was conducted from September 6 to 19, 2022. As a member in good standing with the Insights Association and Isomar Edelman Data & Intelligence, it conducts all research in accordance with local, national and international laws and regulations across all markets. Research standards and guidelines.
