Small business owners, feeling the squeeze, are now darker about their economic future

DAYTON — Small business owners are feeling the squeeze and remain less encouraged about the economy than they have been in decades, according to a recent survey.

“For us, the biggest thing is price pressures,” said David Reger, president of Winston Heat Treating, a family-owned Dayton business of 47 employees that hardens and strengthens steel parts for its customers.

“I understand most of our customers are small businesses like us, so they’re feeling it as well.”

Reger is among a growing number of small business owners whose expectations for the future have reached a new low.

The National Federation of Independent Business said last week that its Small Business Optimism Index dropped 3.6 points in June to 89.5, marking the sixth consecutive month below the 48-year average of 98. Small business owners expecting better business conditions over the next six months decreased to the lowest level recorded in the 48-year survey.

Expectations for better conditions have worsened every month this year, according to the NFIB index.

“Without question, there’s a very concerned small business community about what the next six months look like,” NFIB State Director Roger Geiger told this news outlet.

Ohio’s small businesses are facing “a triple whammy” of runaway inflation, difficult filling of open positions and increasingly daunting supply chain issues while still striving to deliver goods and services to their communities, Geiger said.

A little more than one-third of small business owners report that inflation was their single most important problem in operating their business, an increase of six points from May and the highest level since quarter four in 1980.

“For small businesses that aren’t in the world of bulk buying, they don’t have much negotiation power for items that they use in the delivery of their services or products, so they’re paying the premium costs,” he said. “Inflation is very real to them.”

Winston Heat Treating, which has been in Dayton since its founding in 1967, issued its first price increase last September in about four years, Reger said.

Meanwhile, since last August, the cost of some of the gases the company uses, like liquid nitrogen or natural gas, have increased from 20% to 50% more, he said. In addition, the rising price of gas at the pump has added to transportation headaches for the company.

“It’s really trying to absorb (those price increases) on all fronts without passing the buck to the customer because they’re price conscious, too, and they can’t always absorb those costs,” Reger said. “Our customers, they’re also having huge price increases on steel (and) on all of their different services, too. It’s kind of just a vicious cycle where everybody’s wanting to increase the price, but you’re not always able to pass that on to the end user.”

Supply chain issues are creating inflationary prices that are “out of control” for small business owners, including everyone from small manufacturers trying to buy inventory, to the entertainment industry having to raise prices for admissions and attractions to small restaurant owners trying to find food supplies , he said.

“It’s a challenge across the board for small businesses,” he said. “Doesn’t matter what type of business you’re in, you’re really feeling that pinch.”

Suwapat “Sue” Whitted, owner of Thai Table in Centerville and Thai Kitchen in Miami Twp., said food costs have increased drastically in the past year.

“The chicken, normally, before the pandemic, was $40 per 40 pounds,” Whitted said. “Right now, it’s $130 (for 40 pounds).”

Cooking oil that costs between $17 to $20 for five gallons now costs $50. As a result, the prices of menu items at both restaurants were increased to cover costs.

“We just did it once the end of last year,” she said, noting that she plans to keep it that way by ensuring her staff keeps food waste under even better control.

Poelking Entertainment Group took a big hit the first year of the pandemic and steadily improved to where the business was in 2018 and 2019 as people have gotten back out, according to owner Joe Poelking. The group includes Poelking Lanes in Dayton, Poelking Lanes South in Centerville and Poelking Woodman Lanes in Kettering.

But as business has increased, Poelking’s bowling alleys have had to endure price increases for the products they purchase at a wholesale rate and services for which they contract.

“The guys coming in and taking the trash out,” Poelking said. “We get charged a fuel service charge. Well, that number has, like, tripled in the last six months.”

Supply-chain issues have affected the bowling alleys “across the board” including replacing bowling balls, pins and shoes. Its suppliers have worked to rectify shortages of other products by substituting similar items or switching to brands from different companies.

Poelking said replacing air conditioning at one of the locations took more than a year to occur, with the cost for that increasing by 20 percent when he needed to delay its installation from winter until spring.

“That’s how volatile it is right now,” he said. “Getting those kind of supplies, getting that kind of maintenance, that we’re seeing a lot more issues with than we are strictly with the running of our business.”

While that has already had a negative effect on the bottom line, the business has been slow to ramp up its own prices, but eventually it will need to do so, Poelking said.

In addition, businesses are also facing tremendous problems finding enough staffing, Geiger said.

“It’s staggering to me, but over half of Ohio’s small employers have job postings that they simply can’t fill,” he said. “All you have to do is walk down Main Street and look for the ‘Help Wanted’ signs. Many of them will tell you we can’t even get somebody to show up for an interview.”

That’s not because the businesses are not trying to pay competitive wages, Geiger said. About 77% of Ohio small business owners have raised wages at least once in the past year, with many doing so twice, he said. In addition, many have added benefits and worked on flexible working hours in an attempt to attract people to show up for work.

Staffing has been an issue during the past four or five months. Whitted has been looking for employees to work at a new location set to open in Beavercreek sometime in August or September.

“I’m looking for new employees, but it’s kind of hard to find one,” she said.

Staffing issues at Poelking’s bowling alleys have been ongoing for the past two years at his bowling lanes, he said.

“We’ve got some, but not the numbers that we need,” Poelking said. “For some of them, it’s a dollars and cents issue. They need … more money and this is where we’re at and this is what we can afford at this particular time.”

Poelking, whose grandfather started the first Poelking bowling alley in 1940, said he doesn’t believe the economy will improve in the immediate future, especially with rising interest rates.

Reger, of Winston Heat Treating, said he feels “a sense of caution” when it comes to the economy.

“There’s still a lot of pent-up demand in the supply chain and within manufacturing that I think, despite slowdowns that could occur in the next six to 18 months, to some extent business will continue,” he said.

Despite the challenges she’s facing at her restaurants, Whitted said she believes things can improve over the next six months.

“What I feel (is that) after everyone gets the vaccine, I think my business will go up because people are not afraid much about (coming) out to eat,” she said.

Geiger said NFIB’s hope is that elected state and federal leaders stay out of their own way and follow a “Do no harm” policy by avoiding regulation or taxation that could potentially compound the problems facing independent businesses and complicate matters even further.

“Politicians need to understand right now that small businesses are really struggling,” he said.

Wes Fugate, an employee of Winston Heat Treating, removes heat-treated parts from a furnace.

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