Inflation Is Small Business Owners' Top Concern. Will It Get Better in 2024?

It's been a tough year to run a business, no matter your line of work. High borrowing costs have made even modest credit card balances burdensome for small business owners, and many continue to have big concerns heading into 2024.

Now the goods news is that small business owners are finally getting some relief from issues that were impacting their supply chains, according to a recent Bank of America survey. And businesses are also starting to find it easier to attract and retain talent.

That said, there's a big concern on small business owners' minds as a new year approaches -- inflation. In fact, 78% of small business owners identify this as their primary concern for 2024.

If you're worried about inflation, here's some good news -- it has been cooling. And there's reason to believe it will continue to ease in 2024.

Small businesses and consumers alike might finally get a break

Inflation has been a persistent problem since mid-2021. But in recent months, inflation hasn't been quite as problematic.

For context, the Federal Reserve, which is tasked with overseeing monetary policy, feels comfortable with 2% inflation over the long run. And in November, annual inflation was measured at 3.1% as per that month's Consumer Price Index report. Now clearly, that's not quite as low as 2%, but it's not such a long way off.

The Federal Reserve itself also seems to think that inflation has the potential to taper even further. At its last meeting, the Fed released a statement saying, "Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter." The Fed also said that job gains have moderated since earlier in the year.

This doesn't mean that the economy is on the verge of a recession, so don't panic. But what it does seem to indicate is that growth is slowing down, which could lead to lower levels of inflation in 2024.

How to cope with nagging inflation

At this point, it's hard to say when inflation will get back down to the Fed's preferred 2% level. So if you're a small business owner and are worried about higher costs in the new year, a good bet is to sit down at the end of 2023 and do a thorough spending analysis. Audit your expenses and see if you're paying for anything unnecessary, whether it's a marketing service that's not yielding results or a courier service that's overcharging you.

At the same time, you may want to see if it's possible to streamline or upgrade certain aspects of your company's operations to lower your costs or increase output that leads to higher revenue. You could enhance your customer outreach and generate more sales via social media management software, for example. And remember, purchases of that nature can generally serve as a tax write-off.

Finally, if money is tight due to inflation, cut some employee perks if you have to. You may not relish the idea of taking away your employees' free coffee. But if higher costs are causing a real crunch, think about it this way -- your employees would rather have a job to go to than a free cup of coffee during the day.

Hopefully, inflation will continue to ease in 2024. Until then, take active steps to trim your costs as best as you can.