Small business owners in financial distress: Survey shows drastic effects of inflation and risk of bankruptcy

Small business owners in financial distress: Survey shows drastic effects of inflation and risk of bankruptcy

According to a report by www.leadersnet.de, a recent survey shows that 70 percent of small businesses in Germany are worried about their risk of insolvency. Rising inflation and skyrocketing energy costs represent an enormous challenge for many small business owners.

The increased energy and raw material costs as well as the repayment of government aid by summer 2023 are putting many small businesses in trouble. According to the Lowell Group survey, 70 percent of business owners are specifically concerned with the issue of bankruptcy and almost one in ten say that the risk of bankruptcy is actually very high.

The main reason for the fear of insolvency lies in the lack of an opportunity to otherwise compensate for the increased costs caused by inflation. Rising energy costs and staff shortages are other serious issues identified by respondents.

The survey results show that many small business owners are forced to increase prices and therefore risk losing customers. Savings, such as switching to cheaper raw materials or service providers, are also considered by a quarter of those surveyed. Furthermore, almost half of entrepreneurs expect to have to increase the prices of their goods and services, which may lead to loss of sales and customers. There is also a risk of a wave of layoffs, as almost a quarter of companies indicate that they will have to do without employees.

The burden on entrepreneurs and employees is also reflected in the increasing number of stress-related mental illnesses, as shown by the figures from German health insurance companies. The survey makes it clear that small businesses in particular are faced with threatening challenges and have to deal with all conceivable solutions in order to avoid bankruptcy.

Johan Agerman, Managing Director of the Lowell Group in the DACH region, emphasizes the need to professionalize receivables management in order to realize open items more quickly. He also appeals to consumers to plan their spending thoroughly and refers to help such as the Fabit app.

Overall, the survey shows that Germany's small businesses are facing major financial challenges and, above all, are confronted with rising costs, customer losses and potential bankruptcies. It is imperative that businesses and consumers alike reconsider their financial planning and take action, if necessary, to address these challenges.