Inflation is soaring, not only in the US but globally. Experts blame it on several things, including supply chains due to the pandemic and the ongoing Russian invasion of Ukraine that has increased oil prices.
This unfortunate event has taken its toll not only on consumers but on small businesses too. In times of sustained high inflation, small businesses often face a dilemma of whether they need to raise prices or absorb higher costs. Raising prices could prove profitability, but it could also deter consumers, ultimately decreasing the business’s ability to expand or simply stay afloat.
Finding the right solution for your small business requires strategic thought, consideration, and willingness to continue adapting.
Below we list 6 tips to help you navigate the volatile inflation hikes as a small business owner.
1. Review Your Business Plan
A clear business plan and focusing on ways to do more with less are great ways to reduce costs. Try to automate as much as possible – reducing time wastage, and improving efficiency in accounting, marketing, and more.
2. Examine & Negotiate Service Expenses
Now’s the time to examine your expenses and determine whether they are needs or wants. You may have many low-hanging fruits that you can eliminate from your costs, services that you no longer use yet have never canceled.
Remember, all costs accumulate, so even if it was a $50 per month service, that is $600 per year that you could be saving. And if you cannot cut costs, try to negotiate lower prices. Most companies will be flexible enough not to lose you as a client.
3. Let’s Talk Debt
Most small businesses are facing massive debt spells coming out of the pandemic, and now with the interest rates increasing, the road to recovery may seem longer than before.
To help lower your debt, use any residual funds to pay down high-interest debt. Even if you can’t absolve your debt completely, try to take a bite out of the amount while you can. And if you do not have the funds to help with that, small business financing can aid you. With a fixed term and rate, you know what to expect and won’t be affected by interest rate hikes.
Another tactic is contacting your bank or credit union and trying to renegotiate loans to lower interest rates offering protection against inflation.
4. Pricing Strategies
It’s crucial that you’re pricing your products and services reasonably during inflationary periods. Stay in the loop with what your competitors are doing. If you price your products and services above the market to profit, you’ll probably lose customers. Try to lower the costs of items instead to help you not need to over-increase prices.
5. Cashflow is King
Looking for an inflation hedge? Well, cash flow is it. Small business owners generally tap into their cash flow to help with operational expenses when business is slow. However, this can become detrimental in the long run, as cash flow is necessary for everyday business.
To help you stay on top of things, alternative lending for cash flow needs may be your salvation. Alternative financing is at a fixed rate and will not fluctuate with interest rates; thus, you can have the cash flow you need without creating extensive debt.
6. Tackle Small Business Labor Issues
If the pandemic wasn’t enough, inflation has impacted labor shortages even more so. The high demand allows workers to negotiate better working hours and salaries, leaving many small businesses stumped. However, if you tackle the issue earlier, you can stay on top of the labor issues.
Create a smart strategy to attract good talent and retain your current talent. Offer incentives, training, and market-related salaries. As many employees may not be showing up entirely for the paycheck, creating a unique, thriving culture is crucial that makes them enjoy their job.
As tough as it might be for small business owners, know that you can take steps to combat inflation. We are here to help you too. By applying for short-term financing, you can mitigate the many pressures that inflation will bring and come out thriving in the end. After all, there is an end to this, just like financial assistance from ByzFunder.