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Small Businesses Have Faced No End of Challenges This Year

Featured Partner Contributor
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It’s been a tough year for businesses functioning on a small scale, needing to be more resilient than ever before. Post-pandemic economic recovery has stalled due to the prolonged, intense Russo-Ukrainian War, and it’s expected that economic activity will remain depressed throughout the following year. Amid a slower growth environment, it’s become crucial for small businesses to understand consumers’ spending power and shifts in behavior to build effective pricing strategies. The past year has brought about significant challenges for the private sector; difficult as it may have been, it wasn’t impossible.

The Three Challenges That Have Impacted Small Businesses the Most In 2022

#1 Cost Of Living Crisis

The cost of living has climbed at an exceptionally high rate in 2022 across the world, reaching levels not seen in the past decades. Rising costs include mortgage rates, energy bills, and food, to name but a few. After decades of low inflation, consumers and companies alike are struggling to make ends meet. While the former has a weaker purchasing power, the latter is facing higher operating costs because of soaring energy and materials prices, not to mention employees’ demand for higher wages. Labor market forces operate independently of inflation, and not all companies can afford to help ease the burden of inflation by offsetting the increased cost of living.

#2 Soaring Energy Bills

In 2022, the world was in the middle of an energy crisis of unprecedented depth and complexity, having significant implications for economies, slowing them down to the point that many are heading towards a severe recession. Increasing demand, limited supplies, and the conflict in Ukraine translate into the fact that energy prices will continue to be through the roof. More often than not, small businesses are forgotten as far as energy bills are considered, meaning they’re excluded from the energy price cap, having a dramatic effect on their ability to operate at a profit. Small businesses can’t swallow smaller profit margins as opposed to their giant corporate cousins.

#3 Supply Chain Issues

One challenge every store comes across is shipping. You do the work, pack, and mail your products once an order comes in. Due to the growing demand, every container available had a massive surcharge attached to it, so prices have been more difficult for logistics professionals and people in similar roles to manage. The system relies on many points to ensure goods can be effectively moved from one place to the other. When shipping products gets more expensive, the products themselves become more expensive. Increased costs can also result from raw materials shortages, labor disruptions, and logistical complexities.

Insurance Is One of The Best Ways for Small Business Owners to Manage Risk

Risk management is vital in running any business because it empowers it with the necessary tools to control threats to the organization’s capital and earnings. While external risks (weather, politics, interest rates, etc.) are out of control, internal risks (information breaches, lack of insurance, growing too fast) can be controlled to ensure business operations are efficient and profitable. Insurance is paramount for any risk management plan for your business, allowing your company to transfer some of its liability to an insurance company in exchange for a monthly premium. Your organization’s specific risks depend on factors such as industry, location, and technology usage.

Running a small business can be a herculean task, as many potential hazards can threaten the company’s livelihood. Numerous startups operate on limited economic resources, so they tend to skip certain types of coverage, especially if the law does not mandate them. Nevertheless, these companies end up in situations that require them to take a big leap of faith, regardless of the cost, energy, time or sacrifice. Obstacles are inevitable in the business world; at times, it’s due to unforeseen circumstances, and at other times, it may be your own fault. Small business insurance helps companies manage their risks and claim for losses when things go wrong, meaning that it acts as a safety net.

You’ll almost always need general liability insurance, worker’s compensation insurance, and commercial auto coverage. Other types of insurance that may or may not apply to your business are commercial property insurance, business income insurance, and data breach insurance, which address your bare-bone exposures. It’s recommended to discuss with an insurance agent or a lawyer to see what claims can be filed against your organization and get protection for a price that fits your budget. Many insurance companies provide combined coverage, which can help if you’re running a multi-faceted business. The policy is tailored to your requirements, so there’s no hassle handling multiple policies.

2023 Is Poised to Be a Tough Year, But There Will Always Be Opportunities

According to a Goldman Sachs survey, roughly 91% of small business owners experience difficulty due to the economy’s impact on their industry. The situation has worsened with the onset of the global financial crisis and the recession, painting a pessimistic picture for the year to come. This isn’t to say that small businesses won’t survive, it simply means that a tougher battle lies ahead. Some of the most pressing challenges are represented by finding customers without being a household name, increasing brand awareness, workforce woes, lack of capital and/or cash flow, and burnout. Needless to say, it’s necessary to have a strategic plan for what’s to come.

There’s no denying the fact that 2023 will pose a great many challenges for small businesses, but it’s important to keep in mind there will always be opportunities. It’s not all bad. Every challenge is an opportunity, a chance to grow, learn, and advance on the path of wealth and abundance. Most small business owners are ready for what comes their way, whatever that happens to be, so they’re in a better position to plan for survival. Business formation will most likely continue, despite concerns over the rising costs of living and inflation. People tend to make more local purchases, so there are opportunities in this changing economy.

All things considered, small business owners should be optimistic about 2023, even if they’ll face challenges.