The Impact of Inflation

by Matt Cosentino | Jul 9, 2024
The Impact of Inflation
Small business is often described as the “lifeblood” or the “engine” of the American economy, accounting for a large percentage of the nation’s companies while creating jobs, sparking innovation and growth, and helping to support communities like the ones that make up South Jersey. And while every segment has been dealing with the effects of inflation over the past few years, from major corporations to employees looking to support their families, the men and women behind Main Street mom-and-pop shops and independent professional offices are perhaps feeling the sting the most.

“Inflation is a major concern for our members,” says Vincent Schweikert, chief marketing & technology officer for New Jersey Business & Industry Association (NJBIA). “Eighty-five percent of our members are small businesses that drive the economic well-being of New Jersey. As purchasing power decreases, the cost of everyday goods and services rises. Coupled with less consumer spending, this can lead to elevated prices for materials and services, higher wages, increased operating costs for businesses and higher prices for consumers.”

In his 17 years as the owner of Always a Good Sign, a company in West Berlin that provides signs, vehicle wraps, outdoor advertising solutions and more to clients in all kinds of industries both locally and across the country, Sean Flanagan has experienced peaks and valleys in the economy before, but nothing quite like this. He raised his pricing for the first time just a few years ago—and not drastically—and hopes to remain competitive for his customers, but the increased costs for labor and the added delivery fees from his suppliers make that a challenge.

“This is the worst we’ve seen it because we’re starting to see that people aren’t spending,” he says. “We’re having a hard time with our customers actually moving forward with certain jobs, because they’re not spending the money. A lot of it has to do with [our] increase in costs, but it also has to do with the fact that they’re fighting the battle on their end with cash flow coming in and rising costs [of their own]. They don’t realize that cutting back on the marketing side or their signage is probably the worst thing they can do at a time like this. You need to keep business coming in, and how do you do that? You’re either out there knocking on doors or you’re paying for advertising.”

As the commercial market president for Southern New Jersey and Coastal New Jersey at TD Bank, Greg Carlisle helps handle the lending needs for commercial businesses with revenues between $10 and $100 million and small businesses between $1 and $10 million in nine counties. The effects of inflation have been felt across the spectrum.

“We’re seeing customers feel the pinch of the rising costs of everything,” he says. “Their costs of goods sold are typically higher than they have been in years past and that’s certainly compressing their margins.”

The current state of the economy is also affecting TD Bank and the sponsorships it normally offers for charitable causes or local chamber of commerce events. For example, Carlisle shares, entering a foursome in a golf outing might have cost $1,000 a year or two ago, but now it’s up to $1,400 for the same course.

“We’re being selective when and where we can,” he says. “Unfortunately, in the rising-rate environments, our revenue gets tight, too. We’re just like any other business, even though we’re a bank, so we have to make sure we’re deploying our capital smartly.

“We’re getting all of the same folks coming to us who we have supported in the past, but every year there are new folks coming to us with requests. I don’t want to say we’re scaling back, but we’re trying to be strategic when and where we can. We’ll still do the same five events with a chamber of commerce, but instead of getting eight tickets, maybe we’ll get five. That way we’re still giving the same dollar amount so it fits our budget, and it’s not costing those chambers more. I guess the popular term is ‘shrinkflation,’ and that’s how it’s hitting us.”

It’s hitting Bob Schiavo and his longtime company, Albert’s Transportation, in the way of rising fuel and maintenance costs for his fleet of limousines and other chauffeured vehicles. But after three decades in business, he has withstood challenging times before by continuing to stress a quality experience for clients, offering new and late-model vehicles, professional drivers who are properly screened and 24/7 availability.

“We’ve been through recessions, we’ve been through COVID, we’ve been through 9/11, and during those times a lot of people went out of business,” Schiavo says. “After 9/11, we sold off half the fleet, but we stayed in business. We had to lay off a bunch of employees and we just had a skeleton crew, but we got through it. Fortunately, now we’re busy. Fuel costs and taxes [are a concern] … but we have 30-year customers and we just keep plugging.”

He also believes his company’s versatility is a benefit, since it can handle just about any kind of request.

“The larger companies, especially on the other side of the bridge in Philly, do mostly corporate work and a little bit of retail,” he says. “By retail, I mean proms, weddings, casino nights, bachelor and bachelorette parties. Then there are some part-time companies that just do retail. Fortunately for us, we do both: We do about 65% corporate, and that keeps us busy seven days a week because business travelers have to travel every day. Then the retail kicks in on Friday, Saturday and Sunday, and at this time of year, we have the proms and the weddings starting to kick in.”

Adapting is the name of the game, and Flanagan is taking a similar approach. While some of his traditionally strong customers are struggling, like food trucks or construction, he is actively seeking to expand into those industries that are managing to still thrive.

“Our big push right now is anybody who has multiple commercial vehicles, and we’re also looking to do more with school districts, because there’s a huge opportunity there. We’re only working with a handful of schools and they’re keeping us busy,” he says. “Anything in health care is really booming. Cooper, Virtua, they’re all building new offices and they’re always buying new vehicles. One of our biggest customers in health care is Virtua.

“Business doesn’t suck, it’s just harder. The sale is harder because of the cost of everything, and sometimes people will shop around.”

There are plenty of resources to tap into as well, such as Schweikert’s organization. “NJBIA has taken an aggressive approach on several fronts to combat rising costs,” he says. “It provides members with the resources needed to lower the cost of doing business while providing the tools needed to help them stay informed and compliant and to minimize fees in the ever-changing world of conducting business in The Garden State.”

One of those tools, he explains, helps business owners with their “No. 1 concern”—the increasing cost of providing health care benefits. Through a partnership with Association Member Trust, NJBIA has developed a self-funded health benefit program in which members can receive the same pricing that large employers receive for access to the Horizon Blue Cross Blue Shield network. There is also a similar self-funded 401(k) and profit-sharing solution for businesses with 25 or more employees.

NJBIA offers discounted payroll services through a partnership with Primepoint HR & Payroll, and an online support center to stay compliant with changing laws in the human resources space.

“In addition to the member benefits, NJBIA produces several communications outlets for members,” Schweikert says. “Our award-winning monthly magazine, New Jersey Business, and our daily e-news service, New Jersey Business Today, keep members informed and show how other businesses operate in these challenging times. Our weekly television program, Minding Your Business, is aired each weekend on News 12+ and highlights successful businesses and the many legislative actions that impact businesses across the state. We will also be introducing our new podcast, Planet New Jersey, where we speak with business owners about their successes. We can help members through these and other outlets, including our Member Market, to help communicate the products and services members offer.”

OceanFirst Bank also believes in education and collaboration as effective tools in meeting economic challenges.

“We realize there isn’t one solution that fits for everyone; however as a resource for thousands of businesses, we are able to develop options based on our consultative experience through economic cycles over the last 122-plus years,” says James Andreacci, senior vice president, commercial banking, Southern New Jersey.

“We encourage business leaders to communicate with their trusted resources, which can include their banker, accountant, insurance provider and attorney,” he continues. “When a team is working together, it is easier to be prepared for the challenges or react to unexpected situations quickly and thoughtfully. At OceanFirst, we host events including economic seminars and routinely provide access to experts in technology, cybersecurity and payment processing as additional assistance for our business clients.”

Carlisle explains that different strategies work for different business owners, which is why some are choosing a conservative approach and waiting to see how things shake out, while others see it as a prime time to expand or even pursue investment opportunities. He mentions available office space—with many companies shifting to remote work—as a possibility for repurposed use.

Inflation has slowed, he adds, but has not stopped, and folks continue to anxiously look for the Federal Reserve to potentially cut interest rates. Then there’s that upcoming presidential race that could also have a major impact.

“Hopefully the election sorts some things out,” Carlisle says. “What that looks like for individuals is up to them, but business is still out there and I wouldn’t be overly afraid—the world always makes adjustments. You just have to make sure you look at your finances on a daily basis and you have to look at the long-term horizon. Know the expenses that are coming and have an idea of where your priorities lie, and go from there. The folks who are going to get in trouble are the ones who don’t take that approach and just put everything on credit cards. That’s the part that is going to be a little frightening, seeing credit card usage go up and those interest rates spike with it.”

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Author: Matt Cosentino

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