SMBs increasing prices to cover supply chain costs

Avatar photo
by Emily Atkins

Almost 80 percent of Canadian small and medium businesses (SMBs) are increasing retail prices to make up for extra supply chain costs.

A new study from Capterra uncovered this and other operational challenges for small business over the past year, including supply chain disruptions, the national labour shortage, and increased cybersecurity risks.

The study included 500 local managers and set out to understand business risks faced by SMEs across Canada.

In addition to hiking prices, half of managers says they are increasing salary offerings to attract new hires amid the labour shortage.

The majority of Canadian SMEs have also implemented digital solutions, such as antivirus software, to combat growing cybersecurity risks.

Almost 20 percent of managers said that their company is not investing enough in business growth.

Supply chain disruptions

Of those Canadian SMEs that have experienced supply chain disruption over the past year, 17 percent report to have been significantly impacted. When asked about the most disruptive consequences of supply chain breakdown, 23 percent of respondents said they couldn’t get inventory. Following this, 22 percent said they had to pay higher direct costs to suppliers, while an inability to meet customer demand, and problems managing excess inventory were cited by 19 percent and nine percent of respondents, respectively.

The causes of supply chain disruptions are three-fold, according to the managers surveyed, involving order limits enforced by suppliers, uncertainty surrounding delivery times and order fulfillment, and having to rely on a single supplier for all of their needs.

Some Canadian SMEs have started to take action to mitigate the consequences of supply chain disruptions. In order to maintain sufficient inventory, 34 percent are currently purchasing products to ease bottlenecks and 33 percent are buying larger quantities upfront to solve issues in advance. Thirty-two percent have opted to work with local suppliers to cut out risks of transport, and 22 percent have extended their lead times. The research also emphasizes the need for a business continuity plan to further mitigate the risks involved.

Labour shortage

Canada’s labour shortage is having a direct impact on all aspects of business, Capterra’s research finds. Employees are experiencing higher workloads, and companies are suffering from declines in revenue and business plan disruptions. Specifically, of the managers who are struggling to find new hires, 35 percent are having particular difficulty hiring in customer service, and 25 percent in sales.

In order to attract new hires, affected respondents have been testing a range of solutions, including: increasing salary offerings (50 percent), considering candidates outside of the job specifications (35 percent), and offering better benefits to candidates (32 percent), among others.

Under a third (31 percent) of Canadian managers are confident that they currently face no cybersecurity challenges, likely due to the digital tools in place across many SMEs to combat cyber threats. These include 67 percent of respondents that deploy anti-virus software, followed by firewall software (56 percent) and data backup tools (51 percent).

However, the majority (69 percent) are reportedly aware of at least one cyber threat in their business. In 2022, 36 percent of Canadian small businesses have experienced an email-related attack, while 12 percent have had accounts hacked. Ransomware attacks are the least common cyber threat according to the research, with just eith percent of companies having experienced one in the last 12 months.

“Many of the business disruptions we see Canadian SMEs struggle with have been unpredictable, starting with the pandemic. The best strategy is to incorporate risk management strategies and business continuity plans to mitigate disruptive effects,” said Tessa Anaya, Capterra’s analyst for this study.

“We see many companies turning to digital tools to protect their operations, as well as to help them carry out the creative strategies they need to move past market-wide bottlenecks.”

Capterra’s Business Disruptions Survey was launched online during August and September 2022. The manager-focused survey was completed by 514 full-time senior managers or business owners.