Supply Chain Issues for Startups and SMEs
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Supply chains tend to make headlines only when they break, and right now they’re breaking everywhere. The war in Iran is disrupting key trade routes and driving up transportation costs, forcing startups and SMEs to make difficult decisions, whether to absorb rising costs or rethink their entire operations.
The impact is being felt operationally, financially and strategically, and the pace of change is nothing short of frightening. For many founders, the crisis is highlighting vulnerabilities they hadn’t previously considered.
War in Iran wreaks havoc on global trade
THE Strait of Hormuz remains legally navigable, but warnings from Iranian authorities and real operational risks, including potential attacks, insurance hikes and security threats, have effectively halted most commercial traffic.
“Even if the Strait of Hormuz were to reopen, shipping companies would only return to the route when conditions were stable and secure,” says Jill Anstey, associate director of ocean freight at Baxter Freight. “Carriers will avoid a crossing if the operational risks are too high, even if it remains officially open.”
To keep goods moving, shipments are redirected to ports like Jeddah, with the final stretch completed by road. This option is feasible, but it adds time, cost and additional levels of complexity. Interior inspections, border congestion and customs bureaucracy further delay deliveries, forcing companies to rethink their logistics and plan for potential bottlenecks.
“Longer term, this reinforces the importance of businesses building resilience into their supply chains,” adds Anstey. “Diversifying routes, planning for contingencies and reducing reliance on single high-risk corridors is no longer an option.”
Small business founders and owners balance rising costs and squeezed margins
Even when alternatives exist, it’s small businesses that feel the pressure first. Shipping costs have increased, delivery times have lengthened, and inventory planning has become a gamble.
Matthew Tran, founder of Birchbury, which produces Vietnamese handmade shoes, faces the dilemma. “Before the war in Iran, we paid between $3,500 and $4,000 per container from Vietnam,” he explains. “Now we are closer to $4,500 to $5,200, and our forwarder is warning that prices could rise further.”
Delivery times have also increased by three to four weeks, forcing them to prepare for possible stock depletion. “Our shoes sell for $120 and margins are already tight,” Tran adds. “Pre-purchasing is not really an option; our artisans cannot produce large volumes in a short period of time. Price increases could occur next month or when stocks run out, whichever comes first. It’s a lose-lose situation.”
For small businesses like Birchbury, these increases aren’t just numbers. They affect hiring, marketing budgets and overall operational planning. Every unexpected cost can ripple through the business, forcing founders to make difficult choices about where to invest, pay, or what orders to prioritize.
Business disruptions cause financial problems and don’t just affect logistics
As disruptions begin in the supply chain, strains quickly manifest in cash flow. “If your cost of goods sold increases 20% or 30% overnight, you have to decide: absorb the increase and watch profit margins evaporate, or raise prices and risk losing customers,” says Cody Schuiteboer, president and CEO of Best financial interest. “Most startups don’t make any decision correctly, that’s why they fail.”
Here, the financial model has a key role to play. Most startups do not have the working capital flexibility to offer locked-in prices because they operate with minimal cash reserves. Schuiteboer recommends establishing a line of credit for strategic inventory investments.
“This will allow you to take advantage of price lock opportunities without sacrificing working capital for operational expenses,” he says. “It costs money in interest, but the margin protection far outweighs the cost in multiples.”
Another option would be to consider supplier financing. “If you agree to make a large initial purchase, they will give you 60 to 90 days to pay the bill, which is like interest-free working capital,” he adds.
Forward purchasing, price locking, and the use of financing to protect margins, once optional, have become essential strategies, and this financial lens is now essential to survival, transforming supply chain decisions into broader strategic considerations for growth and stability.
The ripple effect of inflation on businesses
The impact doesn’t stop at individual businesses. Rising costs impact entire supply chains and consumer prices. Recent research of the Chartered Institute of Procurement and Supply had previously warned that due to rising costs of transportation, energy and raw materials, prices of consumer goods could skyrocket in 2026. Current events will likely make such predictions inevitable, sparking more concerns among global businesses and consumers about the long-term impact on supply chain costs and shelf prices.
“The ability to be agile and enter new markets, whether seeking new suppliers or expanding the customer base, is key to growth,” says Sam Coyne, CEO Europe at Currenxie. “However, many SME retailers face high costs when processing global payments. In some cases, the only option is to pass these increased costs on to the end consumer, potentially harming their revenue.”
For international businesses, multi-regional cash management, reliable settlement times as well as foreign exchange risk and margin management are essential. “Traditional banking services are not designed for international SMEs and offer higher costs and slower processing times,” adds Coyne. “These businesses need access to secure, fast and cost-effective cross-border payments as well as local market expertise if they are to continue to be competitive and fuel their growth. »
How founders and entrepreneurs can be proactive
Some sectors are already adapting. Construction companies in the UK are struggling with persistent cost volatility. Travis Perkins, the nation’s largest building materials distributor, publicly warned in March 2026 that suppliers were imposing energy surcharges in response to the war in Iran, a confirmation of what contractors were quietly preparing for.
“Steel prices have increased by 15-25% since the escalation of the conflict, while PVC and other construction materials have jumped by 33%,” says Saddat Abid, CEO of Savior of property. “For anyone managing a pipeline of real estate transactions involving structural or cosmetic work, these are not abstract numbers; they are the difference between a profitable transaction and a costly transaction.”
Abid’s first line of defense was a fundamental shift in the way his company approaches contractor-supplier relationships. Fixed price quotes are now a non-negotiable starting point, negotiated earlier in the project schedule and honored by both sides.
“We no longer view price agreements as just a handshake at the start of a job, but as an essential part of our risk management strategy,” says Abid. “We set material costs with contractors when we agree on a project, not afterward. If a supplier can’t give us certainty on pricing for at least 60 days, we look elsewhere.”
It has also started pre-purchasing materials most exposed to volatility, including insulation, piping and some structural fasteners, for projects that will span several weeks. This would have seemed unnecessarily capital intensive 18 months ago, but now reads like simple business prudence. “Yes, it blocks working capital,” adds Abid. “But the alternative is to see your margin disappear, because a product priced at £800 ($1,064) suddenly costs £1,100 ($1,463) just when you actually need it.”
A new operational reality
The lessons for startups go beyond immediate disruption. For the founders, the war in Iran highlighted that supply chain resilience is no longer optional; it is a strategic priority. Strengthening operational flexibility, maintaining cash reserves and developing diversified supplier networks are now part of the small business action plan.
Beyond logistics and finances, the crisis is also reshaping the thinking of leaders. Founders learn to anticipate shocks, weigh trade-offs more deliberately, and make decisions that balance short-term survival and long-term growth. Those who adopt this mindset not only navigate current turbulence, but build businesses more likely to withstand future uncertainties.