Inflation has ballooned worldwide in recent months, and there’s no question that small businesses are feeling the pinch. Supplies cost more, employees are hard to find, and profits are shrinking. Here are seven tips on how to adjust for inflation.
It’s undoubtedly challenging, but you can adjust for inflation by following these tips.
1. Study your data
Your numbers are always helpful, but in times of rapid inflation, you’ll be especially thankful that you keep a nice, clean set of books. Analyze your data to learn what products and services make you the most money, which ones cost the most to offer, and identify where you can save. Working with an outsourced accounting team will help you determine exactly how to adjust for inflation. If you are looking for a team you can trust, reach out to our team!
2. Cut expenses
Now that you’ve identified where you can save money, go ahead and cut what you can. It’s nice to be able to offer many products and services, but this is a time to tighten your belt.
Focus on the items that keep your business as healthy as possible and ditch the rest, at least for the time being. It’s okay to simplify, especially when times are tough.
3. Adjust your prices
Nobody likes to raise their prices, but the reality is you likely have no choice. Keeping prices the same would be wonderful for your customers or clients. However, if you’re offering products or services at the same prices as before then you’re absorbing the cost.
When you dig into your data, you may find that some things you offer actually cost you a lot of money. That’s not a sustainable business model, raise your prices to keep yourself afloat or find items that cost less for you to sell. Working with the right virtual CFO will help you set appropriate prices to maintain reasonable margins on your products or services.
4. Simplify and automate
If certain routine tasks in your business take a long time to complete, see if there’s anything you can do to reduce those hours. Switching to cloud accounting or an inventory management software would be excellent examples, as doing so would allow you to use your valuable time elsewhere.
Identify where you can simplify and automate. Then, even when inflation comes back under control, you will undoubtedly find that the time you saved helped.
5. Focus on your customer
Remember that your customers are keeping you in business and experiencing inflation in their lives too. Keep the lines of communication clear and open, especially if you’re going to alter your offerings or raise your prices. It’s a lot easier to retain loyal customers than it is to gain new ones, so make sure they know how much you value them and communicate openly to maintain their trust and loyalty.
6. Consider your employees
Good help is hard to find. Those who work for you are feeling the pinch. While it’s essential to automate what you can, consider the consequences it will have on your staff. Identify how you can better use their talents if parts of their roles become automated.
7. Remember, this will pass
Inflation has happened before and will undoubtedly happen again after this. Historically, periods of inflation last anywhere from a few months to several years. One thing, however, must be remembered: all periods of inflation end.
While inflation is difficult for small businesses, there are steps you can take to reduce its impact. Focus on what you can control and face what you can’t with confidence and creativity. With some planning, clear communication, and smart adjustments, you will come out of this inflationary period intact. As always, if you find yourself needing some assistance, work with the professionals who can help you plan ahead and prepare strategically.