Michelle ThompsonSarah Cash launched her store, The 12th House, in Grand Rapids, MI, in 2021. Meanwhile, Kevin Meehan, the owner of the Los Angeles-based restaurant Kali for over 8 years, expressed that he’s facing increasing challenges. Meehan, who also serves as the chef at Kali, noted a slower holiday season in December and an unusual January, where alcohol sales were impacted by the “Dry January” trend.
He highlighted the difficulty of meeting payroll and covering expenses from December, describing it as a significant financial burden. Despite some positive economic indicators like decreasing inflation and a strong GDP, small businesses are still encountering obstacles.
According to the National Federation of Independent Business’s recent monthly survey in January, small business owners are still dealing with the lingering effects of inflation and a shortage of labor. Additionally, there are concerns about a weakening consumer outlook.
This combination of challenges has forced many business owners to adjust rapidly. Even with the prestige of a Michelin star, Meehan admitted that he doesn’t feel entirely secure about his restaurant’s future.
Kevin Meehan
Meehan expressed, “One might assume that with an established business of 8 years and a loyal clientele, we’d have a guaranteed permanent location. However, that’s far from the reality. Every month, I review our expenses, including labor, food, and liquor costs. Everything has increased, and yet, we haven’t made significant adjustments.”
“People have ceased spending money,” is the statement provided.
Recent national data suggests the onset of a decline in spending among Americans. US retail sales experienced a 0.8% decrease in January, significantly below economists’ projections of a 0.1% decline, as reported by FactSet.
Charles Dougherty, a senior economist at Wells Fargo, remarked, “It appears that businesses are encountering greater difficulty in passing on increased costs to consumers.” He emphasized the pivotal role of small businesses in the US economy, considering they comprise the vast majority of business establishments and are thus highly indicative of economic activity.
According to the US Chamber of Commerce, small businesses drive nearly half of US economic activity. Despite the economic challenges of recent years, starting a business remains a quintessential part of the American Dream. Many entrepreneurs, driven by passion, persist despite these challenges.
For instance, Sarah Cash established The 12th House, a gift shop specializing in locally handmade goods in Grand Rapids, Michigan, in 2021 as a tribute to their late father, a metalsmith who crafted jewelry. Initially, they reinvested all earnings back into the business, witnessing promising growth. However, Cash noted a shift in recent months.
“The last eight or nine months have been extremely challenging,” Cash stated. “People are cutting back on non-essential expenses, and unfortunately, gift shops fall into that category.”
Sarah Cash
Cash observed, “I’ve noticed a decrease in the amount people spend per transaction compared to when I initially opened.”
In recent years, Americans have faced some of the most significant price increases in decades. The Consumer Price Index, which measures consumer expenses, reached a peak of 9.1% in June 2022, gradually declining since then.
In January, price hikes moderated more than anticipated, with a rise of just 3.1%—closer to the Federal Reserve’s target of 2% inflation.
However, despite the easing of inflation, Cash, who is organizing a fundraiser in April to support their business, expressed ongoing struggles to stay afloat. They stated, “If this fundraiser doesn’t succeed, I may not be able to sustain my business beyond May.”
Are brighter days on the horizon?
Dougherty suggested that small businesses might experience a delay in feeling the impact of decreasing inflation. However, once they encounter more prolonged periods of stable prices, this could positively influence their outlook.
According to a recent survey conducted by American Express among its small business clientele, some owners are optimistic about 2024. Half of the 557 small businesses surveyed in the United States indicated plans to grow or expand their operations in the coming year.
Meehan expressed hope for a turnaround in the current year. Despite a slow January, he noted a significant uptick in sales during Valentine’s Day week.
“I have no choice but to remain optimistic. I just need to persevere,” he remarked. “Every dollar we earn will be reinvested back into the business.”
