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Comment by MithrilTuxedo | Hacker News Reader

Aren't small businesses best positioned to adapt to these changes?

It's not like they're sitting on piles of cash or other investments that are losing value. If costs go up they'll have to raise prices, just as the prices for what they're buying went up due to rising costs further upstream.

I figured the pandemic cleared out most of the small businesses that would have failed within five years anyway (half do). I wouldn't assume the small businesses left would have as much trouble with inflation as larger ones that operate at greater scales with tighter margins.

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Death by a thousand paper cuts. As an example, the local breakfast shop. The owner claimed he couldn't find cheap employees anymore, they all left to sit at home on unemployment (his words, not mine). He also bemoaned the additional time for sanitizing everything. I saw his quality of food go down, and he didn't transition back to using real utensils (this is a major downside for me, thin plastic cutlery stinks).

Further, they didn't adapt digitally to the take-out heavy model. The prices went up across the board, too. You get a worse meal for 10% more than you used to get a good meal.

A multivariate model of all the inputs would show that many variables matter. They're losing demand, they're paying more for inputs, they're not able to get employees, rough spiral to be in.

> [employees] left to sit at home on unemployment... didn't adapt digitally to the take-out heavy model

The restaurant world, in particular, seems to have heavily bifurcated between owner-as-entitled-extractor and owner-as-management. I'm not surprised to hear that someone who failed the transition to take-out is also blaming labor for his business's hard times.

Not to say that there wasn't some determinism in terms of location, target market, and target demographic. But good judgement, simple business management skills, and just generally being able to roll with punches made a huge difference in terms of survival rate.

I would argue they are not positioned well at all. Generally small businesses have limited inventory and limited cash on hand. So they have to now buy their inputs at an increased price while attempting to raise prices to sell outputs to customers that are cutting back due to their own reduced purchasing power. They then lose employees to businesses that are able to offer raises to their employees. They are also generally more limited in their access to capital than the larger companies.

> I figured the pandemic cleared out most of the small businesses that would have failed within five years anyway

PPP and SBA loans kept these companies alive. The bill hasn't come due yet. This is what people don't understand.

Aren't PPP loans fully forgivable if you met certain requirements? There shouldn't be any bill for most businesses.

If you used them for payroll, they were free money.

No, the point is the PPP money kept uncompetitive businesses alive that should have failed. The bill that hasn't come due: their failures.

So not a literal bill, got it

I think most of those funds got sucked up by the legally savvy before most small businesses got a piece.

There are a LOT of stories online of companies taking the money and posting fake job ads where they never hire people while laying off a significant portion of their workforce. I think there are a lot of games being paid to get PPP forgiveness by companies that don't deserve it.

The problem is on the demand side. If consumers spend less (due to higher cost of borrowing), this makes it difficult for smaller businesses to survive or raise prices (while bigger businesses have access to cheap loans/can reduce workforce etc.).

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