Logistics May Decide How Well Small Businesses Manage Tariff Turmoil

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When tariffs hit small- to medium-sized businesses (SMBs), the impact isn’t a ripple. It’s a gut punch.

SMBs don’t have the resources, capital or leverage to do much about the supply chain pressures that they’re feeling today. However, Growth Catalyst Group CEO Manish Kapoor told PYMNTS CEO Karen Webster in an interview that while SMBs may lack size, they often possess the ability to adapt quickly, something their larger rivals do not.

As global trade tensions, rising costs and shifting consumer expectations collide, agility can be a competitive edge.

“[SMBs] tend to be more nimble, with less corporate red tape to drive change faster if they have the answers,” Kapoor said. “The challenge is knowing where to focus.”

That focus comes down to three levers, including sourcing resilience, market expansion and operational efficiency, he said.

On sourcing resilience, SMBs should start by mapping their supply chains in detail.

“Where are you getting your products from and who’s your partners?” he said. “In some cases, it can be keep doing what you’re doing, but less of it — and then switch some volume over to a different source if that helps.”

Diversifying supply channels, even incrementally, can soften the blow from price hikes, shipping delays or geopolitical risks.

Market expansion may seem counterintuitive in a tough economy, but it’s an essential hedge, Kapoor said.

“If you have a product that’s doing well in the U.S., could it do well in multiple states, and also outside of the U.S.?” he asked.

Expanding reach not only diversifies revenue streams but also spreads risk across different customer bases and regulatory environments.

Operational efficiency is the third lever, and the one with the most immediate gains, he said.

“Many SMBs still run warehouses on Excel and Google Sheets because they can’t afford warehouse management systems,” Kapoor said. “But there are solutions now to automate without breaking the bank.”

In other words, the right technology, coupled with smarter real estate and logistics decisions, can free up capital for growth.

Do SMBs truly understand the connection between supply chain management and overall business resilience?

“In some cases, they might need five different skills to solve the problem, but they don’t have the means to hire five different people,” Kapoor said. “That’s where a fractional model, tapping expertise in a cost-effective way, becomes valuable.”

The first step is separating “external forces versus what they can control internally” and building a playbook for each, he said. That means anticipating tariff changes and trade disruptions while simultaneously optimizing what happens inside the business every day.

Capital constraints make these decisions even harder. Unlike large corporations, SMBs rarely have the leverage to renegotiate payment terms in their favor.

“I don’t think we are going to hear [large companies] say, ‘Oh, things are tough, let’s change our terms from 90 days to 60 days,’” Kapoor said. “That’s not going to happen.”

Instead, SMBs must explore alternatives, from supply chain financing to bank credit lines to investor funding, to keep cash moving. Liquidity is non-negotiable in an environment where suppliers expect to be paid promptly while customers take their time, he said.

If Kapoor could give SMBs one piece of advice on what to stop doing, he said it would be to resist the urge to chase too many opportunities at once.

“Focus on fewer things and do them well,” he said.

Chasing every potential sale can dilute resources and push SMBs into price wars over commoditized products. High-value offerings that deepen customer relationships are a better bet.

Additionally, strong supplier and customer relationships are as important as freight rates or raw material costs, he said.

“If your customers are happy and staying with you, the fight becomes a lot easier,” he said.

Webster said during COVID, “there was a lot more empathy on the part of large buyers paying smaller suppliers because they could.”

Those relationships can pay dividends in difficult times, Kapoor said.

“You can’t take the ‘I’m paying so I’m in charge’ approach,” he said. “Respect breeds reciprocity.”

Kapoor said his clients most want to know about growth.

“Ultimately, revenue solves a lot,” he said. “Serve customers better so they can buy more from you, and more customers buy from you.”

“It’s very hard to shrink your way to greatness,” Webster said.

“Absolutely,” Kapoor replied.

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