Elizabeth Stelle: Inflation is killing small business

Deeanna Hilliard closed her bakery in August. Gluten Free by D&D in Volant had survived pandemic restrictions and persistent worker shortages, but it couldn’t survive record inflation levels.

“The economy did us in,” Hilliard said. “After our third price increase, customer visits dropped, sales dropped (and) regular faces stopped coming in.”

Small businesses can’t get a break. In response to the government’s ham-fisted pandemic response, an estimated 119,374 Pennsylvania businesses closed between March 2020 and March 2021. Now, record inflation is an equally dangerous threat to small businesses in 2022 and beyond.

September’s 8.2% inflation on the year “dashed” hopes that the rate was on the decline. Meanwhile, worker purchasing power dropped by 3%. Runaway government spending, including the enormous spending bill packaged as covid relief and the ill-named “Inflation Reduction Act,” is fueling the price hikes that are killing businesses.

In the spring, a Lincoln Institute poll found nearly 68% of Pennsylvania small businesses named inflation as their top concern, and 48% reported significant supply chain issues.

Hilliard’s business is just one of many that did not or will not survive.

When she started her bakery in 2019, she paid 3 cents an egg. When she closed her business, eggs were 27 cents apiece. Her costs for ingredients and packaging had increased by 49%.

She raised prices five times in 2021 and 2022 to offset ingredients costs. Moreover, Hilliard and her mother — chief baker and co-founder — stopped taking paychecks.

“I took one paycheck in 2022, in April, I think. Everything went back into ingredients costs to keep down prices,” Hilliard said.

In addition to rampant inflation, the bakery faced constant shortages and shipping delays, which made planning impossible. When Hilliard would call suppliers for updates, they would say, “It is on a ship somewhere. We couldn’t guarantee sliced apples or even milk powder. And the price of milk powder tripled.”

Hilliard received a $1,000 Paycheck Protection Program (PPP) grant, but what she really needed was less inflation.

Price increases didn’t just cut into Hilliard’s profits, they impacted her mission.

Like most entrepreneurs, Hilliard saw an unmet need in her community and set out to solve it. Gluten-free baked goods are rare in rural areas like Lawrence County, so Hilliard aspired to specialize in affordable, high-quality, gluten-free treats.

Hilliard explains, “My dad was diagnosed with Lyme disease. The doctor said he had to go on an inflammation-free diet, and that meant no gluten. My mom and I always loved baking and she was like, well, we will have to figure this out.”

It took the mother-daughter team 12 years to perfect their flour blends and recipes.

By the time Hilliard closed her bakery, she had customers across Western Pennsylvania, Erie and Philadelphia, and was shipping to California and New Orleans. She had plans to expand to West Middlesex and open a full-fledged café with a coffee bar and made-to-order sandwiches. The new location would have had a staff of 30.

But that dream is gone.

“People were complaining, saying these are Pittsburgh prices. No one wants to buy a $6 cookie. I just couldn’t do it anymore,” she said.

Hilliard is grateful her employees found new jobs — but she’s still searching. And since the government caused the inflation that forced her to give up her dream job, she’s fed up with the politicians who say they can’t help.

Heading into November elections, candidates need to show voters that they care about curbing inflation, which cripples business owners and consumers alike. Surveys show that the economy and inflation are prime concerns for Pennsylvania voters from both parties, with the vast majority reporting hardships from higher prices.

Lawmakers need to stop the rampant spending that drove inflation from the start. They can also help small businesses by removing regulatory barriers and passing tax reforms to even the playing field between large and small businesses — but committing to responsible spending is the first must.

Record inflation is squeezing family budgets, and for some, like Hilliard, it’s shuttering dreams.

Elizabeth Stelle is director of policy analysis for the Commonwealth FoundationTwitter: @ElizabethBryan