Inflation Not Dampening Small Business Confidence

Eddie Monroy • May 04, 2022

New Survey Research Highlighting Millennial Businesses

Inflation Not Dampening Small Business Confidence

Despite rising inflation, small business owners are feeling motivated to grow their business


While small business owners cite rising inflation as the biggest challenge they have faced in the past year, they are also feeling motivated to grow their business. These are the topline findings from a recent self-reported survey of anonymous respondents conducted by the Capital One Insights Center and Capital One Business in partnership with Morning Consult and the NextGen Chamber of Commerce. As the rate of inflation continues to rise, small business owners report feeling the impact of affordability challenges most sharply in the form of increased costs of goods and lower sale volumes, as cost-conscious consumers re-evaluate their spending habits.


Despite these inflationary pressures, small business owners' trademark optimism and intrepidness1 is evident in the self-reported survey results – they both acknowledge the challenges of inflation on their growth, but remain confident that their businesses will still be operating in the next six months. Small business owners report feeling prepared after taking proactive measures to further mitigate the negative impacts of inflation on their business. Despite this preparedness, some small business owners report several key challenges in addition to inflation. 


All data from this report is self-reported from anonymous respondents across the U.S. Survey respondents included may or may not have relationships with any number of financial institutions and/or products. 


Methodology

Capital One and the NextGen Chamber of Commerce partnered with Morning Consult to conduct a nationally representative, self-reported survey on the perceived challenges and opportunities that small business owners have faced two years after COVID was declared a pandemic, against the backdrop of rising affordability pressures. 


The survey was conducted between March 25 – March 30, 2022 among a sample of 1,200 small business owners and 300 auto dealership owners. Small businesses are defined as those with total annual revenues of less than $20 million. The 300 auto dealership owners each own a dealership with an approximate annual sales volume of at least $1M. Gen-Zers (n=37) are defined as those born between 1997-2012, Millennials (n=434) between 1981-1996, Gen-Xers (390) between 1965-1980, and Baby Boomers (n=326) between 1946-1964. 


Results from the small business owners have a margin of error of plus or minus 3 percentage points and those from the Millennial small business owners have a margin of error of plus or minus 5 percentage points.


Note: All data in this report is from self-reported, anonymous research of U.S. small business owners broadly, not specifically from or about Capital One customers or employees.


Key Findings

  • Nine-in-ten small business owners are confident their business will be operating in the next six months. This level of confidence is similar across demographic groups. Despite this confidence, less than half (43%) of small business owners say business conditions2 in their area are either excellent or good.
  • While confidence in their business is strong, small business owners faced a variety of challenges this past year, with inflation (48%) reported as being the biggest one. More than seven-in-ten (71%) of all small business owners and Millennial small business owners say that inflation has had a negative impact on their business in the past three months. Over three-quarters (77%) are concerned about future negative inflation impact. 
  • Most (76%) small business owners are confident they will be able to fill open positions in the next six months. To attract and retain new talent, small business owners who changed their hiring practices are most commonly offering more competitive wages (16%). Millennial small business owners (47%) are more likely to increase their employees’ wages than other small business owners (36%).
  • But, running a small business in the past year has taken a toll on the entrepreneurs. Nearly half (42%) of small business owners say they have experienced burnout in the past month, with 24% saying they are currently experiencing burnout, a syndrome resulting from chronic stress at work that is characterized by overwhelming exhaustion, negative attitudes, or a lack of commitment with clients and dissatisfaction with job performance.
  • Looking ahead, a quarter (23%) of small business owners are still mainly focused on profit growth despite the margin-tightening conditions driven by inflation. Nearly all (88%) small business owners say technology helps them run their business better and more cost effectively. 
  • Most small business owners report using their own savings to start (77%) or expand (50%) their business. Three-quarters of Millennial small business owners report using their own savings to start their business and just over half (52%) used their savings to expand, similarly to all other small business owners.
  • Additionally, small business owners report that student loan debt has negatively impacted the ability to grow their business. Approximately a third of small business owners (30%) and Millennial small business owners (31%) who have or have had student loan debt say it impacted their ability to scale or grow their business. 


Small business owners are largely optimistic despite rising inflation and other current business challenges. Despite facing challenges this past year such as perceived business condition declines in their area, rising inflation, interest rate hikes, and a tight labor market, small business owners remain optimistic.


Nine-in-ten small business owners are confident their business will be operating in the next six months. Despite this confidence, nearly half of small business owners say local business conditions are either excellent or good (43%), down from 57% in December 2021. However, 94% of auto dealership owners say they are excellent or good.


In the past year, inflation (48%), cash flow (40%), and low sales (36%) have been the biggest challenges for small business owners.3 Millennial small business owners say that inflation (48%) and cash flow (45%) are the biggest challenges. As the rate of inflation continues to climb, small business owners cite affordability pressures as their biggest struggle, with 20% saying that out of the issues they have experienced, it has been the most challenging. Inflation is closely followed by low sales (18%) and cash flow (17%). 


Over three-quarters (77%) are concerned that inflation may negatively impact business performance in the next three months. Seven-in-ten (71%) small business owners say that inflation has had a negative impact on their business in the past three months, most commonly felt as an increased cost of goods and services (59%) and lower sales (23%). Dealership owners have also felt this mostly in increased costs of goods and services (23%) and increased interest rates on loans for property purchased (14%.)


Small business owners who have taken action to mitigate the potentially negative impacts of inflation say they have built up cash reserves (27%), preemptively raised prices (23%), and purchased more inventory (21%). Most small business owners (77%) are concerned about the impact of inflation in the next three months, with approximately a third feeling ‘very concerned.’ Despite small business owners’ concerns, over a third (34%) say they have not taken any actions to mitigate the effects of inflation. On the other hand, dealership owners have all taken some action to combat inflation; they have mostly invested in technology (41%), built up cash reserves (33%), and purchased more inventory (29%).


When recruiting new employees, small business owners say it has been challenging to find qualified candidates and to pay them competitive wages. While 20% say it has been challenging to hire employees in the last three months, a majority (75%) have not hired any new employees in this period. Millennial small business owners (26%) and dealership owners (73%) have found it slightly more challenging to hire. Of those small business owners who have found it challenging to hire new employees, about a third of small business owners mostly cite wages (33%) and a perceived lack of qualified candidates in their geographic area (32%) as the largest hurdles. 


Those who have changed their hiring practices in the past year have most commonly been offering more competitive wages (16%) to improve recruiting. Approximately two-thirds of small business owners have not changed their hiring practices since last year. 


Small business owners are confident (76%) they will be able to fill open positions in the next three months. Confidence is similar across age groups. Those with 51 employees or more are much more likely to be confident in this (88%) than those with 50 employees or less (75%).


Given the challenges small business owners have had to face this year, according to self-reported survey results, running a business during the pandemic has taken a personal toll. Twenty-four percent of small business owners say they are experiencing burnout, up from 20% in December 2021. Gen-Z (38%) and Millennial (30%) small business owners, and dealership owners (41%) are the most likely to say they are currently experiencing burnout. In addition to burnout, most small business owners feel like they are achieving less than they should (62%), feel run down and drained of physical or emotional energy (60%), do not feel support from the government as a small business (58%), and are constantly worried about their business’ finances (57%). 


Student loan debt has impacted entrepreneurs’ ability to scale or grow their business (30%). According to the Ewing Marion Kauffman Foundation,4 individuals who start a business with student loan debt may have access to less capital and may need to delay business investments, which might impact growth. About half (47%) of small business owners who have student loans say that the student loan repayment, interest, and collection pause during the COVID pandemic has allowed them to invest more into their business, while a similar amount say that the pause has not had an impact (53%). Nearly all auto dealership owners (92%) say the student loan pause has allowed them to invest more into their business.


Childcare (35%) and adult caregiving (25%) responsibilities inspired some to start their own business and have largely improved their ability to manage their own time. Parent self-employment increased, according to a study by the Social Policy Institute at Washington University in St. Louis. They found that the enhanced child tax credit in the last six months of 2021 supported entrepreneurship among parents. Additionally, 48% of small business owners agree that being a parent has made them more conscious of their time management skills. Similarly, those who are caregivers (55%) also say they are more conscious of their time management skills.


While a majority plan for short- or long-term organizational goals, almost four-in-ten businesses with 50 employees or less report not planning for either. Smaller businesses are more likely to say that they do not currently outline short- or long-term goals for their organization (38%) than larger organizations (8%). This percentage grows the smaller the business, with half of those who are the sole employee in their business and over a third (37%) of those with one to four employees reporting they do not outline goals. When thinking about organizational priorities, small business owners consider profit the top metric of success (23%), closely followed by customer satisfaction (21%).


An overwhelming majority of small business owners (88%) say technology helps them run their business better. Millennial small business owners are more likely to consider themselves digitally savvy with the skills to adopt new technologies (83%) and to use digital tools to market and grow their brand (80%) than the average small business owner (75% and 73%, respectively). 


Small business owners have faced a variety of challenges this past year, both personal and professional. However, they are taking necessary steps to mitigate the effects of their largest business hurdle - inflation - as well as navigating a challenging labor market. Despite past and ongoing challenges, small business owners are largely optimistic about the future of their business.

 

About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 


About Capital One Business

Capital One® offers a broad spectrum of financial products and services to consumers, small businesses, and commercial clients. Capital One Business offers a diverse suite of financial products, tools and services designed specifically for small businesses, including credit cards with unlimited rewards and banking products and services. Capital One Business is committed to fueling the courageous entrepreneurial spirit that's at the heart of American small businesses. We are focused on listening to and learning from the millions of businesses we serve every day to make sure our products, services and experiences work as hard as they do.


About the NextGen Chamber of Commerce

The NextGen Chamber of Commerce is America’s first business organization supporting our emerging entrepreneurs and business leaders under the age of 40. We want to turn the tide in favor of a new generation that has been tasked with carrying America’s economy through the 21st century. We pursue this mission by advocating for policy solutions, supporting diversity in entrepreneurship, and advancing voices to enable a new generation of business leadership to promote better capitalism.


About Morning Consult 

Morning Consult is a global decision intelligence company changing how modern leaders make smarter, faster, better decisions. The company pairs its proprietary high-frequency data with applied artificial intelligence to better inform decisions on what people think and how they will act. Learn more at morningconsult.com.

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*Note: Businesses with 51 or more employees (n=52) and Gen-Z Small Business Owners (n=37) have a sample size of less than 100.

1 According to the U.S. Chamber of Commerce’s Q1 2022 Small Business Index (SBI), the SBI score of 64.1 remains stable, with small business owners feeling generally optimistic about their day-to-day operations and expectations for the future.

2 Business conditions are defined as the factors that have an impact on business operations, such as inflation, unemployment, and regulations.

3 Ewing Marion Kauffman Foundation (2020), Student Loans and Entrepreneurship: An Overview, Entrepreneurship Issue Brief, No. 5, Kansas City, Missouri.

Response to the Supreme Court’s Decision on the Student Loan Forgiveness Plan

By Eddie Monroy • 30 Jun, 2023
FOR IMMEDIATE RELEASE June 30, 2023 Contact: Aram Nadjarian Email: aram@nextgenchamber.org Phone: (323) 533-4523 Response to the Supreme Court’s Decision on the Student Loan Forgiveness Plan Statement by Eddie Monroy, Executive Director, NextGen Chamber of Commerce WASHINGTON, D.C. - This morning, the Supreme Court ruled to strike down the student loan forgiveness program - it will be a major setback for student loan holders and the overall recovery efforts of the economy. As we continue to navigate the ongoing effects of inflation we must shift our mindset from business rescue to saving American entrepreneurship. A student loan forgiveness plan is a step in the right direction. Student loan forgiveness allows our emerging entrepreneurs to create jobs and invest in their local communities by creating economic opportunities. Entrepreneurs should not feel stuck between debt and a dream. Recently, NextGen Chamber of Commerce conducted a survey that explored emerging small business trends which included the topic of student loans and their relationship to entrepreneurship: ● Three-quarters of Millennial small business owners reported using their own savings to start their business and just over half (52%) used their savings to expand, similarly to all other small business owners. ● About half (47%) of small business owners who have student loans say that the student loan repayment, interest, and collection pause during the COVID-19 pandemic has allowed them to invest more into their business. Student loan forgiveness would not only ease the burden to start new businesses or expand them, but would ultimately provide greater access to wealth building for many Americans who have been saddled with debt - especially women and minorities - helping to create a more inclusive economy. ### About NextGen Chamber of Commerce The NextGen Chamber of Commerce is America's first business organization supporting our emerging entrepreneurs and business leaders. We want to turn the tide in favor of a new generation that has been tasked with carrying America's economy through the 21st century. We pursue this mission by advocating for policy solutions that will benefit business formation, supporting the entrepreneurial ecosystem, promoting diversity in our economic ecosystem, and advancing under 40 voices to enable a new generation of business leadership to promote better capitalism.

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My Journey to NextGen

By Eddie Monroy • 25 May, 2021
I recently started my dream job working to advance small business voices and interests across the country as Executive Director for a national organization whose purpose is to lead a new generation of business leaders and entrepreneurs. My personal story of overcoming barriers and setbacks is one that many can relate to especially if you are an aspiring entrepreneur, business owner, corporate executive, public servant, or a community leader. The path forward is never a straight line, but the opportunity to lead should always look ahead and that’s what I intend to do. Currently America is facing a lost generation of entrepreneurship and business leadership which will inhibit the next generation’s potential for pursuing the American Dream. In just the last few decades we’ve experienced devastating events: 9/11, the Great Recession, and most recently the global Covid-19 pandemic. My generation, millennials, in particular face their own challenging economic setbacks and social barriers in addition to these recent events, especially in starting and growing their own businesses. My story is no different from many others of my generation. I have certainly had to overcome my share of barriers and obstacles. My parents were dreamers who left their native land of Honduras to seek out the American Dream: work hard, raise a family in a safe community, and through their sacrifice and hard work, hope for the next generation to have a better life. My parents established their roots in their new community through a program called TPS (Temporary Protected Status) which gave them the opportunity to live and work in the United States. For decades my parents lived in limbo not knowing if they would ever have an immigration status that doesn’t say: Temporary. We always had a shadow hanging over our heads, never knowing when the clock would run out and the life our family had built would disappear. Many in my extended family have worked for small businesses in various industries from construction, to restaurants, to manufacturing - and it was through their stories of struggle & success that I became interested in small business. These same small businesses give families across the nation a chance to access the American Dream. When I graduated with my MBA, I chose to focus my career on helping uplift small businesses – because strong businesses create thriving neighborhoods and communities. I focused on helping small business owners and their families achieve a new level of success through strategic planning by equipping them with knowledge, resources, tools, and a road map for sustainable growth. However, for far too many small business owners and aspiring entrepreneurs, the path to success isn’t clear or accessible, stalling economic growth and progress in our local communities. I’ve been at the dinner table, translating a conversation between the bank and my parents, after the small business my dad worked for closed its doors, and without his job which provided half of our family income – we weren’t sure how we’d keep a roof over our heads. I’ve been in the room as a multi-generation family business discussed closing their doors because they didn’t have access to commercial lending. I’ve sat at conference tables and listened as business owners shared that they couldn’t cover payroll after maxing out personal accounts. I’ve also been in the worst room one can think of: the arrangement room of a funeral home, devastatingly planning the burial for my only sibling, my 18 year old sister. I’ve witnessed firsthand the effects of inequitable policies, an economy that works for some, but not for all, and seen what hardship looks like for working families. My work with small businesses, championing immigration reform, and advocating for diversity in leadership brought me to the NextGen Chamber of Commerce - this is the natural next step for me - to help create an inclusive economy by lifting the voices of existing and aspiring entrepreneurs. Our generation has been through difficult struggles, but we are at a moment in history where we can draw a new roadmap for the future of our economy and society. A future that is inclusive, diverse, and breaks down the economic barriers to entrepreneurship. Together we can learn from history and write a new chapter as we enter into our own roaring 20’s. I will do my part in building new bridges, forming new partnerships and developing the creative solutions that are needed to meet the challenges the next generation – our generation - is tasked with solving!

Op-Ed: Why Asian Americans and Pacific Islanders need stronger political representation

By Jeff Le, NextGen Chamber Advisory Council Member • 31 Mar, 2021
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My family — Vietnamese refugees who escaped communism and eventually resettled in southern Georgia as farmers — has sadly experienced unprovoked hostility over the course of their time as Americans. While many AAPI individuals now feel seen, we still lack serious representation at the highest levels of government. Sens. Tammy Duckworth, D-Ill., and Mazie Hirono, D-Hawaii, have argued that our government needs officials who understand the unique challenges our communities face. Only then can policies meet our specific needs in voting rights, criminal justice reform and economic opportunity. Voting rights are under attack across America under the guise of Jim Crow 2.0. In my family’s home state of Georgia, the Republican-controlled General Assembly and Gov. Brian Kemp fast-tracked a deeply controversial new law to dramatically limit no-excuse absentee voting for all elections, eliminate Sunday voting in runoffs and prosecute people for even handing out water to voters in long lines. 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To make matters worse, the government’s pandemic rescue packages did not give AAPI-owned business special consideration. The Small Business Administration must do more to provide governments with the inclusive guidance on engaging with AAPI-owned businesses that was promised to Black and brown businesses. Finally, Asian Americans and Pacific Islanders need to be protected from crimes targeting us for who we are. Georgia’s recently enacted hate crime law came about after political pressure from the business community and communities of color, rising from last year’s social justice movement. However, the Atlanta murders have highlighted just how challenging hate crime prosecutions can be. That is why the Biden administration should work with Congress to pass the COVID-19 Hate Crimes Act and Jabara-Heyer NO HATE Act to stem violence against communities of color, and hold the Department of Justice and states like Georgia accountable. 2021 could be a defining year for channeling years of heartbreak and adversity into long-overdue reforms. Instead of silently suffering, AAPI individuals have found the courage to speak out about their disenfranchisement. I hope this energy translates into real momentum to ensure we always have a seat at the decision-making table. It’s time for the Biden administration, the private sector and other communities of color to champion AAPI communities everywhere. This can only be done with AAPI leaders at the table, with the influence of, and a commitment from, allies to support these efforts. Other senators from communities of color should also commit to supporting AAPI leadership and representation. Sens. Alex Padilla, D-Calif., and Raphael Warnock, D-Ga., have a timely voice to demonstrate allyship. Having AAPI communities as a valued part of America’s recovery, the justice system and the political process is an important and necessary step for a stronger and more equitable union. Jeff Le is a political partner at the Truman National Security Project, which is dedicated to building a new generation of progressive leaders in national security. He was deputy director of external and international affairs and deputy cabinet secretary to former California Gov. Jerry Brown. Click Here to Read Original Piece Posted in Roll Call

Five Things for the SBA to Prioritize

By Lexie Farkash, NextGen Chamber Advisory Council Member • 26 Feb, 2021
Isabel Guzman was confirmed in early February as the head of the US Small Business Administration and has hit the ground running to begin addressing the immediate needs of the next generation business community. As she digs into her work, there are basic considerations the SBA should prioritize when engaging this critical demographic. The next generation of business leaders and entrepreneurs is made up of the largest and most diverse generation, yet they face challenges like no other generation has faced before. As Ms. Guzman and the SBA implement the new administration’s agenda, it is vital they consider the unique, pressing concerns of the next generation. 1. Equity and Inclusion: It’s no secret that we’re in the midst of one of the worst economic crises of our time and it’s clear that minority owned businesses are some of the hardest hit. But even before COVID-19 swept through the world and sideswiped our economy, minority businesses were already less than white, male owned businesses. The SBA reported that minority-owned small businesses hover at around 15%, and while this number is growing, it’s going to take serious dedication to address systemic inequality in earnest. 2. Gen Z and Millennial Business Owners: The majority of business owners are getting older with younger generations of entrepreneurs not replacing them at an equal pace. In fact, millennials have some of the lowest rates of entrepreneurship. And, when they do start a business, it’s more likely that their business will fail compared to the attempt of a more experienced entrepreneur. This isn’t because millennials and Gen Z lack the innovation or mentality-- there are structural barriers and mountains of debt older generations haven't had to face. The SBA needs to shift its understanding of entrepreneurship to properly address this gap and empower the next generation. 3. Student Debt: Speaking of mountains of debt… Americans currently owe more than $1.7 trillion in student loans, and this number is growing. In response, people are driven to donate their eggs, are putting off starting families and buying homes, and it’s really no surprise that, given this debt and lack of guidance on how to manage it, younger people are starting businesses at the lowest rate in generations. It’s nearly impossible to ask someone already saddled with tens of thousands, if not hundreds of thousands, of dollars in debt, to take on more risk by starting a new business. 4. Environmental Innovation: At the back of our collective consciousness is the climate change crisis. The environment is changing and in response, big and small businesses alike are recognizing the need to prioritize green energy and innovative solutions.This isn’t just an issue of interest; climate change will directly impact this generation and their children. Millennials and Gen Z have grown up in a world where minimizing your personal carbon footprint is a good thing. This individual innovation is necessary to enact change in a lasting, meaningful way nationally. The SBA should prioritize providing resources for small business owners and the next generation of entrepreneurs to ensure climate consciousness is built into business models from day one. 5. Intersectional Approach: The SBA cannot run through this list like a checklist and expect small business entrepreneurs to be empowered and able to fight through the recession, systemic inequality, towering student debt, and other challenges this generation must face down. Before we can truly empower small business owners, the SBA needs to consider the intersecting nature of these concerns and how business owners are not a monolith that can be placated in the same way previous generations were. There are more people of color, more women, more LGBTQ+ folk, more disabled people, more immigrants all interested in pursuing entrepreneurship, all with distinct yet intersecting needs. Isabel Guzman is a champion for small business owners and has illustrated she’s ready to fight for all entrepreneurs. Under her leadership, the SBA will need to be up to the task of providing targeted resources to help address the systemic inequality that hinders the next generation of entrepreneurs from reaching their full potential.

Statement on SBA Administrator Nominee Isabel Guzman

By Aram Nadjarian • 08 Jan, 2021
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