The start of the year is shaping to be a critical one for small business owners as inflation dampens expectations, according to new research.
IPSOS data showed nearly 80% of small businesses say the beginning of 2023 is important for their bottom line as the combined effects of inflation and a possible recession erode consumer confidence.
With small businesses anticipating rising prices and less revenue, the potential for increased business risk is a real possibility, says small business insurance expert Pavel Yurkov.
“The start of the year can often be a busy time for many small business owners. As businesses adjust to the turbulent conditions, the level of risks they face may change too,” Mr. Yurkov says.
How are small businesses changing?
While the economic conditions are strained, two-thirds of small businesses (64%) report their business is in good health, according to the US Chamber of Commerce.
Perhaps explaining this confidence amid adversity, American SMBs have taken a proactive approach to the challenges presented to them over the last couple of years.
When going into lockdowns, many SMBs successfully invested in technology that allowed them to work from home, kickstarting a change to the way small businesses operate.
Now, more than half of all businesses start from home and 19 million are home-based.
When faced with supply chain issues and delays due to the COVID-19 pandemic, many SMBs switched from relying on overseas suppliers to buying from local markets.
A Capterra survey found 88% of SMBs plan to switch their suppliers closer to the US and 45% plan to switch all of them.
When wages went up and many industries were struggling with labor shortages, employers prioritized employee and customer trust to tide them through the hard times.
The Chamber of Commerce says this resulted in nearly two-thirds of SMBs (65%) retaining their staff size over the year, while nearly one in five (19%) increased their workforce.
“US small businesses have been extremely resilient, adapting to the challenges thrown at them,” says Mr. Yurkov. “However, all this change could affect their business insurance policies, so it’s important to ensure they are still adequately covered.”
When to review your business insurance policy
Mr. Yurkov says there are many situations where it might be beneficial for business owners to review their policy.
As mentioned above, 35% of small businesses have changed the size of their workforce in the past year, meaning some may have a drastically different team than when they last renewed their insurance.
“If your workforce has shrunk since you last reviewed your policy, you could adjust your insurance to better suit its current size and potentially save money in the process,” says Yurkov.
“Conversely, if your business has grown and your workforce has increased, you may need to consider updating your coverage.”
Similarly, if businesses interact with clients in a physical environment, there are many risks they come up against.
“If your business is understaffed or you have new workers that may be untrained, it could create situations where safety protocols aren’t followed, which opens businesses to liability claims,” says Mr. Yurkov.