By Jessica Irving Marschall, CPA, ISA AM

President & CEO, Marschall Accounting Services LLC, The Green Mission Inc., Probity Appraisal Group, and GM-ESG

 

September 6^th, 2026

 

Every September (especially after Labor Day) our tax practice, MAS LLC, crunches the numbers for expense planning and revenue growth. This year, however, the conversation has a different tone as many clients have veered away from discussions about growth targets and new markets and instead the same questions keep surfacing in slightly different forms: How do we absorb another round of cost increases without losing customers, staff, or margin?

 

As background, our firm works with mostly small business clients.  Our clients often only have our team for tax advisory and accounting versus larger corporate clients who typically have a team of 25+ of my equivalents and have a multi-thousand dollar a month tax budget.

 

These client questions deserve a serious answer because the small business community is being squeezed from multiple expense categories on a typical small business Chart of Accounts. Electricity, water, health insurance, business insurance, travel, and borrowing costs have all moved higher over the past year, and several are already projected or proposed to rise again in 2027.

 

Large companies can ride out cycles like this with deep balance sheets, purchasing power, and hedging tools. At the click of a button they can infuse $50k+ of working capital into the bank account to cover payroll and increasing costs. Small businesses tend to have none of those advantages. What we do have is the ability to make decisions quickly and proactively and minimize the reactive decisions each month.

 

Our advice to our clients emphasizes dynamic choices made quickly, usually within the month, based on a detailed look at the specific industry or profession to determine how each business should react to price shocks while proactively growing profit margins so that rising revenue does not somehow turn into a year of losses, which is enough to end the life of many small businesses.

 

Here is where the pressure is coming from, what the numbers actually show, and what owners can realistically do about it.

 

Where Main Street Stands

 

The mood among small business owners is better than it was in early summer, but it remains fragile. Below, are some articles and statistics we reviewed over the past week:

 

1. The National Federation of Independent Business reported that in June 2026, 21% of owners named inflation as their single most important problem, the highest reading since October 2024. By July, that share had dropped to 14%, and the Optimism Index climbed to 99.8, its best level since August 2025.
2. Owners are planning to hire and make capital outlays, which is genuinely encouraging. Yet the same survey showed the Uncertainty Index rising to 91, well above its long-run average of 68, and a net negative 16% of owners reporting positive profit trends.
3. The view from the executive suite tells a similar story. The AICPA and CIMA third-quarter 2026 Economic Outlook Survey, which polled CEOs, CFOs, controllers, and other CPAs in senior management roles, found that optimism about the U.S. economy rose four points, from 32% in the second quarter to 36% in the third quarter, and optimism about the global economy improved from 19% to 24%. Confidence in respondents’ own organizations held steady at 48%.
4. Yet the same executives are pulling back on spending. Only 49% expect to expand over the next 12 months, down from 54% last quarter, and projected outlays for IT, capital investments, and training and development all softened. Inflation was the top concern, with nearly eight in ten respondents saying it poses a greater risk to their business than deflation and pointing to labor costs, materials costs, energy prices, and interest rates as the key pressures. Tom Hood of the Association of International CPAs described a business community that remains resilient but is taking a disciplined approach to investment and growth while monitoring inflation, costs, and broader market conditions.
5. Hiring sentiment was the clearest bright spot in that survey, with the share of executives reporting too few employees rising from 28% to 33% and more organizations moving ahead with hiring plans. It is telling that larger organizations with far deeper resources than our clients are responding to this environment with the same combination of cautious optimism and spending restraint.

Main Street is optimistic about the future despite current profit pictures remaining thin, which combination is why strong cost discipline is crucial.

 

Electricity: Our Region Is Ground Zero

 

Of all the utility line items we review with clients, electricity is the one that surprised the most people this year as it jumped past our budget and forecast expense models from prior years.

 

The latest available data from the U.S. Energy Information Administration show a national average residential electricity price of 18.44 cents per kilowatt-hour and an average commercial price of 13.54 cents per kilowatt-hour in May 2026. Those are national figures, and our region is considerably worse.

 

Electricity increases have been particularly acute across parts of the Mid-Atlantic placing Maryland’s March residential electricity price at 22.2 cents per kilowatt-hour, approximately 17% above the prior year, which remains a substantial increase.

 

Across our region, the price increases are due to the grid we share. PJM Interconnection, which serves 13 Eastern states and the District of Columbia, saw wholesale prices rise 76% year over year in early 2026 as data center demand accelerated. Virginia hosts more data centers than any other jurisdiction in the world, and Dominion Energy alone served roughly 450 of them, mostly in Northern Virginia, at the time of its last rate case.

 

The regulatory consequences are now arriving in actual dollar figures on utility bills.

 

In November 2025, the Virginia State Corporation Commission approved Dominion’s first base-rate increase in decades, adding $11.24 per month for a typical residential customer in 2026 and another $2.36 in 2027, bringing the average residential bill to roughly $165 per month. That was about 30% less than Dominion requested, but base rates are only part of the story.

 

In May 2026, the utility proposed a separate fuel-cost recovery that could add roughly $22 per month for a year, or alternatively about $8 per month plus $1.80 per month stretched over ten years.

 

Local governments fared worse. The Virginia Energy Purchasing Governmental Association negotiated a new contract with Dominion carrying an overall 24.9% increase effective July 1, 2026. When a county, town, or school division pays a quarter more for electricity, that cost eventually finds its way into property taxes and fees.

 

…and I could write a novel on the increases in local property taxes across the nation. This always seems to be the catch-all when federal and state budgets shrink but funds still need to be collected to run local services.

 

Energy Innovation’s May 2026 analysis lays out the broader causes, including volatile natural gas prices, aging transmission and distribution infrastructure whose costs rose 64% between 2016 and 2023, extreme-weather repair bills passed along to ratepayers, and a utility business model that rewards capital spending. Together, these factors contribute to a larger aggregate bill for the end user. The same analysis projects that the repeal of clean-energy tax credits under the One Big Beautiful Bill Act (OBBBA—tax legislation passed in July 2025) will push consumer rates up another 9% to 18% by 2035.

 

For a small business with significant kilowatt-hour consumption, whether a restaurant, a shop with refrigeration, a manufacturing floor, or a laundry, I would stress-test the 2027 budget using electricity-cost increases of 15% to 25%, particularly in areas experiencing significant utility or capacity-cost pressure.

 

Energy audits, LED conversions, demand-charge management, and time-of-use scheduling have moved from the optional column to the necessary one, especially for our energy-intensive clients.

 

Water: The Quieter Utility Shock

 

Water has attracted far less attention, but it is following the same trajectory.

 

Bluefield Research reports that average U.S. household water and sewer bills rose 5.1% in 2025, the steepest annual increase in five years, and that water costs are up nearly 25% since 2020.

 

A Stanford-led study published July 8, 2026, in Nature Sustainability, and covered by USA Today, Bloomberg, and Fortune, modeled how climate stress forces utilities into expensive infrastructure such as desalination and water reuse. In the study’s example city of Santa Cruz, California, median household bills could nearly double from about $64 to as much as $120 per month by 2050.

 

Virginia is not Santa Cruz, of course, but the underlying mechanism can be universally applied. Deferred maintenance, aging pipes, new treatment requirements for emerging contaminants, and rate structures that recover fixed infrastructure costs regardless of consumption all push in the same direction.

 

For water-intensive businesses, this is a line item to pull out on the Chart of Accounts and track month to month.

 

Health Insurance: The Sharpest Increase in Two Decades

 

If electricity is the surprise, health insurance is the crisis, and it is arriving through three separate channels at once.

 

Small-group insurers, which most firms with a handful of employees rely on, proposed a median premium increase of 11% for 2026, according to KFF’s analysis of preliminary filings from 318 insurers. The carriers pointed to underlying medical cost growth of roughly 9%, higher prices for hospital care, physician services and prescription drugs, specialty medications such as GLP-1s, labor shortages, tariff uncertainty, and risk pools that deteriorate as small-group enrollment declines.

 

The picture for 2027 is worse.

 

In August 2026, the Peterson-KFF Health System Tracker reported that nearly 300 small-group insurers across all 50 states and the District of Columbia are proposing a median increase of 14% for 2027. Most requests fall between 10% and 20%, with a median underlying medical cost trend of 10.8%.

 

Several insurers specifically cited the migration of healthier small employers into level-funded and self-funded arrangements, which leaves the fully insured pool sicker and more expensive for those who remain.

 

The individual marketplace, where many sole proprietors, independent contractors, and owners of very small firms buy coverage, has been hit even harder. The enhanced premium tax credits expired at the end of 2025, substantially increasing what many previously subsidized enrollees pay out of pocket.

 

At the same time, individual-market insurers implemented substantial underlying rate increases for 2026, with finalized increases coming in at a median of 20%. Preliminary filings for 2027 now show insurers proposing another median increase of 14% to 15%.

 

If those filings hold, typical marketplace premiums will have climbed by more than one-third between 2025 and 2027. Georgetown’s Center on Health Insurance Reforms and healthinsurance.org have tracked the same pattern state by state. Insurers have cited the expiration of enhanced subsidies, and the resulting potential for healthier consumers to leave the market, as factors expected to worsen the risk pool and increase costs for those who remain.

 

Employer-sponsored coverage, the third channel, produced this week’s headline.

 

On September 2, the Washington Post reported on a Marsh survey of more than 1,800 employers projecting an 8.2% increase in health-benefit cost per employee for 2027, the largest jump since 2003. That 8.2% figure already reflects the plan changes employers intend to make. Without those changes, they expect costs to rise 11%.

 

Aon separately projected 9.5%, which would push the average cost above $19,000 per employee, while the Business Group on Health projected a median 9.2% and WTW projected 11.1%.

 

Marsh attributed a full percentage point of the increase to GLP-1 utilization and pointed to provider consolidation, government reimbursement failing to keep pace with inflation, and, notably, AI-enabled claims and billing software that helps providers bill more aggressively, which the Post reports accounts for roughly another percentage point. Roughly 59% of employers plan to shift more of the burden to workers through higher deductibles and premium contributions.

 

To put that into concrete terms, a ten-person firm facing a 9% to 11% increase on a $19,000 per-employee benefit is looking at $17,000 to $21,000 of additional annual cost with no corresponding revenue. That is roughly the cost of a part-time position.

 

Our insurance for employees increased 19% this year. We will continue to offer insurance to our employees because healthy team members who can see doctors tend to be happier people, and their health is critical to our company’s performance and we can only hope that other small businesses make the same choice.

 

Business Insurance: A Market Softening for Everyone but You

 

The commercial property and casualty market is softening, but the relief is not reaching small businesses.

 

The Council of Insurance Agents and Brokers reported an average premium decrease of 2.0% across all accounts in the second quarter of 2026, the second consecutive quarterly decline and the first broad softening since 2017. Commercial property rates have fallen roughly 10% to 13%, and cyber premiums have declined for twelve straight quarters.

 

Look beneath those averages, however, and a two-speed market emerges.

 

Broker survey data for the first half of 2026 show large accounts enjoying average decreases of 2.7% and mid-sized accounts 1.9%, while small-business accounts actually rose about 1.1%.

 

Minimum premium floors, catastrophe exposure, and hardening casualty lines are consuming whatever relief the property side provides. B.F. Saul Insurance’s 2026 outlook notes that commercial auto increases have moderated to 10% to 15%, down from the 20%-plus hikes of recent years but still painful, driven by repair costs, advanced driver-assistance systems, and litigation. Umbrella and excess liability remain under pressure from large jury verdicts.

 

Workers’ compensation is the one stable line, and insureds with clean loss histories can often secure flat or modestly lower renewals.

 

It is worth noting who is benefiting from all of this. Insurance Journal reported on September 2 that the U.S. property/casualty industry posted a net underwriting gain of $31.7 billion for the first half of 2026, up from $11.6 billion a year earlier, with after-tax net income up 53% to $77.8 billion.

 

The industry is highly profitable and competing for business, which means small business owners have more leverage than they may realize. A softening market is exactly the time to remarket your account, and a renewal that rises sharply without a line-specific reason is a clear signal to shop.

 

We work with some brilliant and trustworthy insurance professionals. Reach out if you need a referral.

 

Travel: Airfare and Fuel Lead the Way

 

For firms that travel to serve clients, attend trade shows, or inspect properties, as all four of my companies do, travel inflation is running well ahead of the broader economy.

 

The U.S. Travel Association’s Travel Price Index rose 7.1% year over year in July 2026, more than double the 3.4% increase in the Consumer Price Index. Airfares have risen every month of 2026 and now stand 19.9% above December and 25.5% above July of last year.

 

Motor fuel remains 24.8% higher than a year ago despite two consecutive months of declines. Hotels are the one bright spot, only 2.6% above last year after falling in both June and July.

 

U.S. Travel’s spring forecast expects travelers to respond by shifting toward shorter, closer, drive-market trips, and businesses are doing the same.

 

Borrowing: Higher for Longer

 

Mortgage rates offer a useful indicator of the broader long-term borrowing environment, and they are not cooperating.

 

As of September 2, 2026, the average 30-year fixed rate stood between 6.66% in Freddie Mac’s survey and 6.75% in Bankrate’s, levels that multiple reports described as a one-year high.

 

Rates moved up on renewed conflict in the Middle East, persistent inflation concerns, and growing doubt that the Federal Reserve will deliver further cuts this year.

 

For small business owners, this shows up in SBA 7(a) loans, commercial real estate financing, lines of credit, and equipment leases. As American Bank’s education center observes, households and small businesses are facing rising costs across nearly every category simultaneously, and the cost of financing the gap between revenue and expense is not coming down anytime soon.

 

The Unavoidable Conclusion: Prices Must Rise, But Thoughtfully

 

No small business can absorb all of this and determining how to rescue these margins is a constant part of our analysis.

 

NFIB data showed a net 38% of owners raising average selling prices in June 2026, the fourth consecutive monthly increase, before easing slightly in July. Price increases are coming across Main Street. The real question is whether they are done well or done badly.

 

Maillie LLP’s guidance on strategic price increases and Regions Bank’s eight moves to improve small-business margins converge on several principles that match what we advise our own clients.

 

1. First, segment before you raise. Not every customer, product, or service line should carry the same increase. The smart approach is to identify where your value is highest and your competition weakest and raise there first. Low-margin, high-effort work may need a larger increase, or it may simply need to go.
2. Second, know your unit economics. You cannot price intelligently without understanding the fully loaded cost of each product or engagement, including the electricity, insurance, and benefit costs discussed above. Too many small businesses still price on intuition.
3. Third, communicate value rather than cost. Customers accept increases tied to better service, faster turnaround, or expanded scope far more readily than increases blamed on your utility bill. Give notice, explain what they receive, and, where possible, offer a bridge such as a locked rate for early renewal.
4. Fourth, raise prices in smaller, more frequent steps. A 4% increase each year is easier for customers to absorb than 12% every three years, and it keeps you from falling behind cost growth in between.
5. Finally, cut costs and grow revenue at the same time and inch both your gross margin (if applicable) and profit margin incrementally.

 

Investopedia’s analysis of whether it matters more to lower costs or increase revenue lands where most CPAs do: cost reductions drop straight to the bottom line and are entirely within your control, but they have a floor. Revenue growth has no ceiling, but it carries execution risk.

 

The healthiest firms pursue both, and the sequence matters. Cut waste first so that new revenue lands on an efficient cost base.

 

But please beware of a pattern we see repeatedly with clients. They increase productivity and revenue, but increase costs, especially below-the-line costs, on nearly a one-to-one basis. They end up working harder for essentially the same margins while simultaneously expanding their risk through long-term hiring and fixed costs needed to service the higher volume of revenue.

 

Finally, employ AI strategically as the tool it is. In our companies it is fantastic for putting our research into tables, creating templates for cost analyses, double checking our calculations in work papers and reviewing hundreds of pages of the IRC code and Tax Court cases to help with our research. However, to effectively use AI you must first understand the questions you are posing and the processes being asked to create. As a CPA I cannot ask Claude or Chat GPT to propose a medical plan to treat an ongoing illness. But I can ask for links to the tax code and Tax Court support for an S Corp shareholder to retroactively implement an accountable plan after year end.

 

Use it to save time on human errors and automate processes but not to pass oneself off as a nuclear scientist when employed as an architect.

 

Jessica Irving Marschall, CPA, ISA AM, is President and CEO of Marschall Accounting Services LLC (www.marschalltax.com), The Green Mission Inc. (thegreenmissioninc.com), Probity Appraisal Group (www.probityappraisal.com), and GM-ESG (www.gm-esg.com). She has 26 years of experience serving more than 400 clients annually. Connect with her on LinkedIn at linkedin.com/in/jessicamarschall.

Sources

Electricity

• Energy Innovation, “U.S. Electricity Bills Are Rising Fast: Which States Are Paying More and Why,” May 29, 2026. https://energyinnovation.org/expert-voice/u-s-electricity-bills-are-rising-fast-which-states-are-paying-more-and-why/
• Virginia State Corporation Commission, “SCC Issues Order on DEV Biennial Review 2025,” November 2025. https://www.scc.virginia.gov/about-the-scc/newsreleases/release/scc-issues-order-on-dev-biennial-review-2025/scc-rules-in-dev-biennial-review-case.html
• Inside Climate News, “Virginia Regulators Approve New Dominion Rates, Assign More Costs to Data Centers,” January 2026. https://insideclimatenews.org/news/07012026/virginia-regulators-approve-new-dominion-rates/
• Cardinal News, “Dominion details 2 scenarios for higher monthly bills,” May 8, 2026. https://cardinalnews.org/2026/05/08/dominion-details-2-scenarios-for-higher-monthly-bills/
• Virginia Association of Counties, “Localities in Dominion Energy Territory to Experience an Overall Rate Increase of 24.9% on July 1, 2026.” https://www.vaco.org/county-connections/localities-in-dominion-energy-territory-to-experience-an-overall-rate-increase-of-24-9-on-july-1-2026/
• Maryland Public Service Commission, “U.S. EIA Corrects Maryland Electricity Price Data,” June 3, 2026. https://psc.maryland.gov/news/2026/u-s-eia-corrects-maryland-electricity-price-data/
• S. Energy Information Administration, Electric Power Monthly, Table 5.6.A, average price of electricity by state (May 2026 data). https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a

Water

• USA Today, “Your water bill could skyrocket due to climate change, study says,” July 12, 2026. https://www.usatoday.com/story/news/weather/2026/07/12/water-bills-increase-climate-change-study/90874019007/
• Bloomberg, “California Study Shows How Climate Change Will Increase Water Bills,” July 8, 2026. https://www.bloomberg.com/news/articles/2026-07-08/california-study-shows-how-climate-change-will-increase-water-bills
• Fortune, “How climate change could raise your water bill,” July 8, 2026. https://fortune.com/2026/07/08/why-is-my-water-bill-so-high-climate-change/

Health Insurance

• Washington Post, “Health insurance costs projected to spike next year by 8.2 percent,” September 2, 2026. https://www.washingtonpost.com/business/2026/09/02/health-insurance-costs-projected-spike-next-year-by-82-percent/
• KFF, “How Much and Why Premiums are Going up for Small Businesses in 2026.” https://www.kff.org/health-costs/how-much-and-why-premiums-are-going-up-for-small-businesses-in-2026/
• KFF, “In Preliminary Rate Filings, ACA Marketplace Insurers Largely Propose Double-Digit Premium Increase for 2027.” https://www.kff.org/affordable-care-act/in-preliminary-rate-filings-aca-marketplace-insurers-largely-propose-double-digit-premium-increase-for-2027-following-a-steep-climb-this-year/
• Peterson-KFF Health System Tracker, “How much and why ACA Marketplace premiums are going up in 2027.” https://www.healthsystemtracker.org/brief/how-much-and-why-aca-marketplace-premiums-are-going-up-in-2027/
• Georgetown CHIR, “Early Signals Suggest a Second Year of Double-Digit Marketplace Premium Increases.” https://chir.georgetown.edu/early-signals-suggest-a-second-year-of-double-digit-marketplace-premium-increases/
• org, “Health insurance premium increases for 2027: proposed rates by state.” https://www.healthinsurance.org/blog/health-insurance-premium-increases-for-2027-proposed-rates-by-state-and-what-consumers-should-know/
• Healthcare Dive, “Employers face ‘existential reckoning’ as health costs surge,” August 2026. https://www.healthcaredive.com/news/employers-2027-health-costs-bgh-survey/828734/
• Fierce Healthcare, “Employers’ health benefits costs could rise 8.2% in 2027: Marsh survey,” September 2026. https://www.fiercehealthcare.com/payers/employers-health-benefits-costs-could-rise-82-2027-marsh-survey

Business Insurance

• F. Saul Insurance, “2026 Trends & Insights in Business Insurance.” https://www.bfsaulinsurance.com/guides/2026-trends-insights-in-business-insurance
• Insurance Journal, “First Half US P/C Industry Underwriting Gain Jumps to $31.7B,” September 2, 2026. https://www.insurancejournal.com/news/national/2026/09/02/883667.htm
• Insurance Business, “Small business premiums rise while big accounts get relief.” https://www.insurancebusinessmag.com/us/news/workers-comp/small-business-premiums-rise-while-big-accounts-get-relief-588535.aspx
• com, “Average Business Insurance Cost 2026” (citing CIAB Q2 2026 Commercial Market Index). https://businessinsurancecost.com/benchmarks/2026

Travel

• S. Travel Association, Travel Price Index, August 12, 2026. https://www.ustravel.org/research/travel-price-index
• S. Travel Association, U.S. Travel Insights Dashboard, September 2, 2026. https://www.ustravel.org/research/travel-recovery-insights-dashboard

Borrowing Costs

• Bankrate, “Mortgage rates September 2, 2026.” https://www.bankrate.com/mortgages/analysis/mortgage-rates-september-2-2026/
• Wall Street Journal Buy Side, “Mortgage rates today, 9/3/2026.” https://www.wsj.com/buyside/personal-finance/mortgage/mortgage-rates-today-9-3-2026
• The Mortgage Reports, “Mortgage Rates Today, September 2, 2026.” https://themortgagereports.com/mortgage-rates-now/mortgage-rates-today-september-2-2026
• American Bank, “How Rising Costs Continue to Impact Families and Small Businesses in 2026.” https://www.americanbankusa.com/education-center/how-rising-costs-continue-to-impact-families-and-small-businesses-in-2026/

Small Business Sentiment and Pricing Strategy

• NFIB, “Small Business Optimism Continues to Rise,” August 11, 2026. https://www.nfib.com/news/press-release/new-nfib-survey-small-business-optimism-continues-to-rise-11/
• NFIB, “Small Business Optimism Picks Up in June,” July 14, 2026. https://www.nfib.com/news/press-release/new-nfib-survey-small-business-optimism-picks-up-in-june/
• Accounting Today, “Economic confidence increases, but businesses pull back on spending,” September 4, 2026. https://www.accountingtoday.com/news/economic-confidence-but-businesses-pull-back-on-spending
• AICPA & CIMA, “AICPA and CIMA 3Q26 Economic Outlook Survey,” September 2026. https://www.aicpa-cima.com/professional-insights/download/aicpa-and-cima-3q26-economic-outlook-survey
• Maillie LLP, “Taking a Strategic Approach to Price Increases.” https://www.maillie.com/taking-a-strategic-approach-to-price-increases/
• Regions Bank, “8 Moves to Increase Small Business Profit Margins.” https://www.regions.com/insights/small-business/article/8-moves-to-increase-small-business-profit-margins
• Investopedia, “Is It More Important for a Company to Lower Costs or Increase Revenue?” https://www.investopedia.com/ask/answers/122214/company-it-more-important-lower-costs-or-increase-revenue.asp

AI and Small Business

• Business Insider, “AI Transforms Small Businesses, but Challenges Persist,” July 2026. https://www.businessinsider.com/ai-transforms-small-businesses-but-challenges-persist-2026-7
• S. Chamber of Commerce, “AI Is Powering Small Business Growth in 2026.” https://www.uschamber.com/co/run/technology/ai-powered-growth-engines
• Small Business & Entrepreneurship Council, “The AI Tools Small Businesses Are Using,” April 2026. https://sbecouncil.org/2026/04/25/the-ai-tools-small-businesses-are-using/