What We Need To Do to Fight Inflation In Our Business
For many small business owners, raising their prices is the natural reaction to inflation. And while this strategy may be necessary in some cases, it can also cause customers to leave, especially if prices are raised too quickly. Here are six ways to protect your business from inflation and ensure it remains profitable.
1. Reduce expenses
One of the easiest ways for small businesses to deal with inflation is by cutting their expenses as much as possible. In particular, take a look at your monthly service contracts to see if there's anything you can do without.
For instance, are you paying for a co-working space you no longer use? If so, you can probably cut that expense. Of course, there will be necessary subscriptions that you can't afford to let go of. For those contracts, you can either negotiate the price with the vendor or see if you can find a less expensive alternative.
2. Prioritize cash flow
Cash flow is always crucial for small businesses, and a lack of cash is the number one reason most businesses fail. Consistent cash flow helps your business run more smoothly by allowing you to pay your vendors and invest in new opportunities. To improve cash flow, look for ways to encourage your clients to pay your business faster. You'll want to be flexible, of course, because they're also feeling the crunch of inflation.
You might also consider offering discounts to customers who pay their invoices early. And for larger products or services, you could start requesting an upfront deposit.
3. Lower your supply chain risk
The best way to lower your supply chain risk is by diversifying across multiple vendors. If you're overly reliant on one vendor, you'll have fewer options when it comes to price increases. But by diversifying, you have the opportunity to look for alternative products and materials.
4. Automate what you can
Another way to deal with inflation is by leveraging technology to automate as many repetitive tasks and processes as possible. By leveraging technology, you can accomplish more in your business while spending less, freeing up your and your employees' time to focus on the higher-level problem
5. Focus on employee retention
You're not the only one feeling the effects of inflation. Your employees are feeling it, too, as they pay more for everyday items. But as inflation rises, your employees may also expect their salaries to rise.
If you can't afford an across-the-board pay increase, there are other ways you can help ease the financial burden of your employees. For instance, letting employees work remotely could cut down on commuting costs. You could also offer stipends for things like child care, tuition, or home insurance.
6. Consider opening a line of credit
A line of credit can help your business meet its working capital needs, offer payroll increases to your employees and invest in your company's future. The benefit of taking out a line of credit is that you can draw money as you need it and only repay what you actually spend, allowing you to stay one step ahead of the latest challenge.
