Xero, the global small business platform, announced the launch of its Xero Small Business Insights (XSBI) program which includes quarterly updates on the small business economy for the United States and Canada, based on aggregated and anonymized data from tens of thousands of Xero customers. It also launched a special XSBI report: Small business snapshot: United States and Canada which provides insights on business performance and the impact inflation is having on US small businesses.
The report found that, while small business growth seemed to be nearly double the pre-pandemic average, this was largely due to higher prices rather than an increase in the amount of goods and services sold. In short, it was likely due to inflation and small businesses increasing their prices to solve for market conditions.
Inflation is skewing the numbers
The report, produced in partnership with Accenture, tracks the performance of small businesses all the way back through 2017, reveals:
Also Read: HRSoft Named to Constellation ShortList™ for Compensation Management
Sales growth in March 2022 was 11.3% year-over-year (y/y). This is not quite double the pre-pandemic average growth of 6.7% (y/y), but slower than the 12.6% (y/y) rise recorded in February 2022.
Inflation rose 8.5% (y/y) in March 2022 which means real sales growth, which excludes price effects, was a much slower 2.8% (y/y) (and down from a 4.7% (y/y) rise in February 2022).
That is, removing price impacts shows that around three-quarters of the sales growth in March 2022 was due to higher prices rather than an increase in the amount of goods and services sold.
“In March 2022, the US was experiencing higher inflation than any other major economy1,” said Chris O’Neill, Chief Growth Officer, Xero. “As borrowing costs rise, expenses increase, and customer dollars decline in purchasing power, it is more important than ever that small businesses get in control of their finances. Understanding exactly what is happening to their costs and profit margins at all times will help them better navigate this tricky period.”