The Economics of Small Business

I rode through the drive-thru at Arby’s the other day. Yes, they have “the meats,” but it’s been a minute since I ordered a couple roast beast combos. (Actually it’s been a few years). I paid $31.71 for two combo meals. I was surprised…for a moment. My expectation of the cost as a consumer was about half that price. As a business owner who has witnessed record high inflation rates, rising wage costs, high fuel prices, and post-COVID supply chain issues, I expected a big tab for take-out.

I saw this post recently online: “If inflation is up 7%, then why in the hell is everything 50% more expensive?” It’s Reddit rants like this one that leads me to the conclusion that most consumers do not understand basic economics. (When the President blamed gas station owners for rising fuel costs last Independence Day, it showed most folks in government don’t understand the economics of small business either.)

A customer of the Texas Inn recently posted a tirade on our Facebook page. I “felt his pain,” as one ex-president would put it, until he accused us of being “greedy” because prices have gone up. Instead of getting angry, I did some math. And math always hurts my head. When you spend $10 at the Texas Inn you can get a hot dog, a bowl of chili, and a Coke — and here’s where your money goes:

$3.09 food costs 

$2.94 labor & benefits 

$1.20 city and state sales tax (average between Lynchburg, Virginia and Harrisonburg, Virginia meal tax)

$0.72 to rent/utilities 

$0.36 to to-go supplies/condiments/dry goods 

$0.35 credit card fees 

$0.20 equipment purchase/maintenance 

$0.16 insurance (general/liability/workers comp) 

$0.14 cleaning supplies & equipment 

$0.13 marketing 

$0.10 charitable giving/sponsorships

$0.06 debt servicing/bank fees

$0.03 professional fees 

$0.01 regulatory compliance (State & Federal)

$9.49 total costs

The $0.51 left over out of $10 is PROFIT. And IF the business makes a profit (barring a 70% sales decline from the pandemic (2020) or having to replace a $31,000 fire suppression system (2021) or labor issues (2022) and food costs don’t double (2023), then half of the profit goes to the IRS and the Commonwealth of Virginia.

It’s not greed. It’s basic economics.