A recent study by the NFIB found that an astounding 22% of business owners report inflation as the biggest problem in operating their business. This percentage is at the highest level it has been since Q4 of 1981.
With fluctuating demand and supply chain issues continuing to drive prices up, many small business owners are struggling. So how can you combat the effects of inflation without it negatively impacting your small business? Try these 5 strategies to help:
- Lower Your Supply Chain Risk
If possible, try to renegotiate terms with your suppliers and contemplate locking in prices with them before the next increase. You may also need to look for additional suppliers to avoid being dependent on just one or two who might not be able to secure the goods that you need. When possible, think about buying inventory in bulk to help you save money and prevent shortages.
- Be Transparent with Your Customers
Although you may be reluctant to raise your prices, you may need to do so in order to stay afloat. People everywhere are experiencing inflation so it likely won’t come as a surprise to your customers. In fact, a study from business.org found that 82% of small businesses needed to increase their prices for products or services in response to high levels of inflation. If you do have to raise prices, it’s important to do so periodically in smaller increments so it’s less of a shock. Also, make sure to be upfront with your customers about price increases. They are more likely to be understanding and receptive to higher prices if you clearly communicate with them and explain the reason behind the increase.
- Revamp Your Product/Service Offerings
During supply chain shortages you may struggle to acquire certain items and be forced to adjust your product and service offerings. Try to find beneficial ways to diversify what you offer such as launching a new product or service that will give you better profit margins.
- Assess Your Spending
Take some time to assess your business’s finances and see if there are ways to cut costs and lower your overhead expenses. Are there any non-essential expenses you can cut back on? Do you have any subscriptions or services that you can do without or downgrade? Even curbing your spending slightly can help you lessen the impact of inflation on your business.
- Take Out a Small Business Loan
With low rates, now is an ideal time to secure small business funding. A business line of credit or term loan can strengthen your cash flow, allow you to stock up on inventory, and help cover increased costs.
Next Steps Inflation isn’t going away in the near future, so as a small business owner, it’s critical to implement necessary business strategies to help protect your business. Not sure where to start? We can help. Contact us today and one of our dedicated relationship managers will discuss your needs in order to determine the best product for your business. We are here to help, every step of the way.