HispanicBusiness

Inflation is the top concern of small-business owners for the first time since January 1981, according to a June survey of the National Federation of Independent Business.

Confronted with rising gasoline, energy and food costs, some business owners have raised prices, but many have found creative ways to cut costs and delay further price increases.

Small-business owners are feeling pressure from inflation "every time they open up the back door" to receive new inventory, said William Dunkelberg, chief economist at the federation. He said 41 percent of small businesses raised prices in June in response to this "backdoor inflation."

"There has been a really dramatic increase, and it seems to be accelerating," he said of the inflation rate.

In June, 20 percent of small-business owners cited inflation as their top concern, compared with 8 percent in February, according to the National Federation of Independent Business.

Prices are starkly higher today than they were last November when Patrick's Market opened in downtown Omaha, said owner P.J. Andersen.

Andersen said the wholesalers and distributors who supply his store delayed raising their prices to cover higher transportation and shipping costs. Eventually, though, they reached a breaking point, he said.

Large-volume chain stores are in a better position to negotiate or to absorb higher costs, Andersen said. But he buys less, so he pays more.

"The grocery business is so price-sensitive -- especially in an economy like this," Andersen said. "I don't want to sell milk for $4 a gallon, but I have to be able to pay the milk bill."

It's more difficult for small businesses to raise their prices because they risk losing customers, said John Pinkerton, the owner of First Edition Printing in Omaha and four assisted living facilities in Nebraska. So owners have to economize, he said.

"Going out of business is not an option," Pinkerton said. "You just keep cutting back."

Pinkerton, whose assisted-living centers employ 35 people, recently increased the portion of health insurance workers pay. He is considering dropping health coverage entirely.

"Do you close up completely, or do you drop health care?"

Pinkerton said he has raised prices at his printing business and now charges a delivery fee. Customers, for the most part, have been understanding.

Bumping up prices isn't the only response of small businesses to a challenging economy.

"Entrepreneurs are ingenious," Pinkerton said.

For example, Jim Nelson, owner of Jim Nelson Media Services, has started to barter with other businesses as a means of paying bills. Exchanging products and services frees cash to pay for things that can't be traded, Nelson said.

"We're all in the same boat," Nelson said. "If we can't work together, the whole boat sinks."

Nelson also has changed the way he contacts potential clients. He now attends networking events where he can meet multiple prospects instead of driving to their individual offices.

Pinkerton said he, too, has limited his work-related travel and bought a hybrid vehicle to drive to his businesses in North Platte, Wahoo and Omaha.

He is considering installing solar panels on one of his assisted-living facilities. Solar panels already power his printing business.

Like consumers, small businesses comparison-shop for the best deals.

Andersen, at Patrick's Market, said he switched distributors because of lower prices.

Pinkerton buys some food for his assisted-living centers from discount and bulk retailers instead of from wholesalers. He purchases some paper for his printing business from a bulk retailer as well.

Good customer service becomes even more important, the business owners said.

Patrick's Market, for example, introduced more specialty items, such as locally produced and organic products, Andersen said. The products cost more but are popular with customers.

Customers seem willing to pay higher prices at the small grocery because it offers a more personal experience, he said.

"You can't put a price on that."

Nelson said he introduced payment plans for customers unable to pay up-front. Flexibility is better than losing business, he said.

Nelson said he has become more organized, which has increased his productivity. He pays close attention to the bottom line and meets weekly with several bankers and accountants.

Steps they are taking now should make their businesses stronger once the economy rebounds, Nelson and Andersen said.

"It's easy to complain, but what do you do about it?" Nelson said.

His advice?

"Don't panic, be proactive and stop procrastinating. Take one step at a time, and watch your step."