Inflation bites small business

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For small business, the hits just keep on coming.

Just as COVID-19 has washed over communities in waves, fallout from the pandemic continues to flood the economic landscape, triggering supply shortages, hiring challenges and rampant inflation.

Throw in the Russian invasion of Ukraine fueling unprecedented spikes in the price of gas that has raised the cost of everything that gets delivered and you have a very challenging environment for small businesses.

While inflation had been mostly held in check throughout the first year of the pandemic, prices began rising in earnest in the spring of last year, when the inflation rate jumped from 2.6 percent to 5.4 percent.

According to a report from business.org, 92 percent of small-business owners reported that the cost of supplies or services needed to run their business has increased. By the end of 2021, 71 percent of small-business owners reported at least a 20 percent increase in costs for supplies and services and 82 percent had raised prices of products or services due to inflation.

More recently, however, it has only gotten worse. The rate of inflation has exploded to its highest in 40 years, with consumer prices rising 9.1 percent in June alone. And here on Long Island, owners of small businesses find themselves on the front lines in the struggle to stay afloat.

Restaurateur Ben LoManto, owner of Vespa Italian Kitchen & Bar in Farmingdale, says prices have “really gone crazy” in the last three months.

“When we’re looking at our invoices, something like paper goods, they’ve gone up like 300 percent since COVID,” LoManto told LIBN. “The amounts on my invoices are just ridiculous. They’re like 50 and 60 percent higher than they used to be.”

And it’s not just paper goods, he says. Everything that’s needed to supply his business suddenly costs a lot more than it did not too long ago.

“We go through a decent amount of shrimp,” said LoManto, a 42-year veteran of the restaurant business. “Three months ago, it was between $8.25 and $9.50 a pound for a decent-sized and good-quality shrimp. Now it’s $13.50 a pound. That’s a 50-percent markup. And when you use a decent amount of it, it adds up to a lot of money.”

As a result, LoManto has had to raise prices, though that’s been a balancing act akin to walking a tightrope.

“At the end of the day, it becomes a numbers game,” he said. “What can we do to increase our prices without causing irreversible damage to our business?”

For Antoinette Burrows, owner of Sweet & Savory Café on Merrick Road in Baldwin, inflation is just the latest wrench thrown into her 8-year-old small-business.

Before the pandemic, Burrows coffee shop was open five days a week, but after shutting down for months in the spring of 2020 and then switching to curbside service, sales dropped 75 percent. So, Burrows opted to cut operating hours and is now open only on Saturdays and Sundays, when her loyal following comes to enjoy her best-selling chicken and waffles, along with pastries and other brunch items.

“We still were able to manage,” she said. But lately, what little foot traffic the business could attract has waned, and the café has struggled with staffing issues and the rising cost of inventory.

“If my costs increase, then I have to pass that on to my guests,” Burrows says. “We’ve raised prices, but not at the rate of inflation.”

Two years ago, the Baldwin café charged $4.97 for a 16-ounce latte. Today, that latte costs $5.50.

Carlos Flores, who owns three small businesses, has seen inflation’s impact on two of them. Flores owns Picasso Design, a painting contracting firm, Mombo Grill & Lounge and Baccano Barbering Company, all based in Riverhead.

“The one I haven’t felt any backlash or disturbance with the flow of business is the barbershop. That has been constant since the pandemic eased, so that one hasn’t been affected at all,” Flores said. “The ones that have been affected are the restaurant and the painting contracting business. Whether it’s material costs or labor, it’s had a terrible impact.”

Flores says the cost of chicken and other meats have soared, and those products are essential to the operations at Mombo, where the best-selling menu items are the popular churasco, a tender skirt steak, and parillada, a collection of different meats that are cooked on a small coal-fired grill on the patron’s table.

“It’s gone up 20 percent some weeks and you definitely feel it,” said Flores, who has had to raise prices to help cover increasing costs. “And the price of labor has gone up because of the shortage of labor, so people are asking for more money.”

And like other contractors, Flores has sometimes had to recalculate estimates on painting projects, as staffing issues continue to present a challenge.

“So jobs might take longer than they used to, which costs more money, so you have to raise your prices and still see if it’s feasible for the client,” he said. “I don’t think we’ve lost business, but you have to work on a smaller margin.”

New businesses, such as Sara Gallitto’s Wild Roots Wellness studio, may not have much prior experience to compare recent economic strife to, but they still have to navigate fast-rising inflation.

Gallitto, a former instructor at Long Island fitness centers, opened Wild Roots in a 2,000-square-foot upstairs space at 45 East Main St. in Riverhead just 15 months ago. The business offers massage, acupuncture, yoga, workshops on meditation and a variety of other topics, as well as a large selection of facial and body-care products.

“Instead of raising prices, I added services and products to increase revenue,” she said.

While opening a new business during a pandemic might sound risky, Gallitto said she was confident that more people would want to spend time and money on self-care.

“After being cooped up for so long, it was something people were craving,” she said.

Gallitto’s biggest challenge has been staffing and the rising gas prices haven’t helped, especially for employees who have to drive some distance to come to work. But inflation still looms large, she says, and could eventually affect revenue.

“I’m afraid if inflation continues at this pace, people will hesitate to spend as much money on personal care services,” she said.

That’s a fear shared by a lot of small business owners, according to Margo Cargill, first vice president of the Nassau Council of Chambers, who says the biggest concern is whether inflation will lead to some kind of recession.

“A lot of people were saying that was a strong possibility, but now they’re backing away from that, which is good,” said Cargill, a principal of Titanium Linx Consulting, a public relations and communications firm specializing in large-scale development projects. “We don’t want that to happen because obviously the less disposable income people have, the less they’re going to spend, the less they’re going to go out, the less they’re going to patronize our downtowns.”

Cargill says more businesses are cutting their hours of operation, mostly because of ongoing hiring issues and fewer customers.

“With our restaurants specifically, you might see your favorite restaurant not open anymore for lunch, because it costs too much money to keep the lights on and bring everybody in when it’s not their peak hours,” she said. “Now that we have this post-COVID, hybrid work environment, people aren’t going into offices and if they’re not going into offices, they’re not going out to lunch.”

Cargill said COVID continues to cast a long shadow over small businesses.

“We’ve never seen anything like this, and hopefully we won’t see anything like this for a long, long time. But I believe it’s all as a result of COVID,” she says. “We have to reinvent ourselves. This is going to be something that businesses in general have to change their models around and adjust accordingly.”

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