Worried about inflation and supply constraints? Try being a small business

Most smaller firms don’t have the heft and sophistication to thrive in an environment of booming demand and short supply—the same forces that many of America’s biggest companies have been able to ride to higher earnings. High inflation, a tight labor market, stressed supply chains and dwindling liquidity are straining many small businesses, exacerbating the existing power imbalance between small and big firms.

It all deepens the challenges that small companies have faced since the onset of the Covid-19 pandemic. And stresses will mount for those that take on more debt as the Federal Reserve raises interest rates.

Ethel’s Baking Co., a wholesale bakery in Metro Detroit, struggled last year to get deliveries of chocolate, butter and other ingredients when supplies ran short. In its first 10 years of operation, the 27-person company usually placed orders weekly or monthly. After the pandemic hit, that way of operating put it behind larger food…

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