COVID-19 and the resulting supply chain issues, a labor shortage, Russia’s invasion of Ukraine, and high inflation have all wreaked havoc on the US economy in recent years.
Small business owners are bearing the brunt of it, and many are skeptical that things will get better anytime soon. In March, the Small Business Optimism Index fell 2.4 points, with inflation being the owners’ biggest concern. While many factors are beyond their control, owners can take steps to combat negative economic factors that affect their business, such as inflation.
The responsibility and commitment required to run and grow a profitable and financially sound company can be daunting, especially in these trying times. Everything from materials, production, wages, and profitability to customer satisfaction can be affected by inflation.
Inflation is a new experience for many business owners today. They must be resourceful in their approach. Inflation can be difficult to combat, but the good news is that you have options to protect your business and improve your bottom line.
Here are some suggestions to assist business owners in dealing with inflation:
1. Reduce some of your regular expenses
With inflation on the rise, business owners aren’t responsible unless they review every expense thoroughly. Consider the importance of each expense to your company. Don’t slash costs that are critical to employee happiness or customer satisfaction. Remove items with a low return on investment, cancel subscriptions you don’t use, and downsize your office space if necessary.
2. Go over your finances again
This could be an excellent time to refinance a business loan. The risk of adjustable rates rising in the future can be mitigated by refinancing a variable interest rate to a fixed rate. While cash-back credit cards and airline cards should be used with caution, they can be beneficial to a business owner. If you must use a credit card, choose one that offers rewards.
3. Evaluate your company’s operations
Inflationary pressures have prompted many business owners to rethink their operations and consider ways to become more efficient, productive, and cost-effective. Investing in business technology could be beneficial. Examine workflows and look for ways to streamline procedures. Look into customer relationship management, inventory management, and project management software.
4. Consider alternative supply chains
Owners must be proactive in light of supply chain unpredictability and ongoing issues. Look for different suppliers, preferably in different places. You need the assurance that your stock will be maintained even if a specific supplier is unable to meet your requirements. Purchase as much as possible in one shipment to avoid having to order as frequently and being subjected to price increases. Also, be open with your customers. Maintain awareness of potential disruptions and inform your customers.
5. Raise prices gradually
According to the National Federation of Independent Business, most business owners increased their prices in the previous year. While that approach isn’t ideal for retaining and adding customers, you can avoid alienating customers by gradually increasing prices.
Enhance customer service by providing additional services, rewards, and discounts. In your marketing messages, concentrate on the differentiators. To strengthen your relationship with your customers, communicate with them honestly. Tell them that inflation is affecting all businesses and that you’ve tried to keep prices as stable as possible, but that you’re adding value wherever you can and appreciate their business in your postings.
Inflation can be difficult for small businesses to deal with, but the right strategies and resources can help owners get through it and emerge stronger.