Survival Strategy for Your Small Business Amid a High Inflation Environment
“60 may be the new 40 but the 100-dollar bill is the new 20.”
It seems these days everybody’s talking about inflation. Things are getting so expensive that a dozen eggs now cost $3.99 at my favorite grocery compared to a month ago when it retailed at $2.90. At the rate the prices of goods are skyrocketing, pretty soon I will have to put a tank of gas on layaway.
It's been nearly 30 years since inflation in the U.S. exceeded 4% and nearly four decades since the country experienced an extended run of rising prices. Although U.S. inflation eased to 7.7% in October from a high of 9.1% in June--the overall impact on day-to-day living has been substantial including subsequent interest rate increases by the Fed.
So, what is driving inflation?
Bad monetary policy – the central bank “printing too much money” which devalues the currency relative to the value of real goods and services--driving prices up.
Corporate Profits – companies have been increasing their prices--driving prices up.
Rising Inflation Expectations – a psychological explanation, which holds that if the public thinks prices will rise, that alone can drive prices up
Supply Constraints – bottlenecks in the economy creating shortages of key goods (e.g. energy and other commodities)--driving prices up.
Demand Pressure – an economy that is running “too hot” with excessive demand forcing buyers to pay more--driving prices up.
COVID Small Business & US Citizen Assistance-- the fed & state provided needed assistance (tax cuts, stimulus checks, extended unemployment benefits, PPP, EIDL) giving essential (and many times extra) cash to spend--driving prices up
Wage Increases--driven by the limited supply of labor and demands for higher compensation--drive prices up.
So, what can small business owners do?
Be Flexible — rethink your business approach, look for alternative sources, innovate as needed, and pivot to new markets.
Review Your Business Financials — take a careful look at your revenues and expenses, ramp up debt repayment and/or refinance variable-interest loans into fixed-rate ones.
Increase/Hold Prices — avoid across-the-board price hikes, whenever possible, but if you do need to increase prices make sure and notify customers in advance. Other alternatives are "eating" the increase and not passing it to your consumers or sharing the price increase. Make sure whatever approach you choose makes sense to your customer and is consistent with your competition/industry as a whole.
Invest in Automation and Technology – these can help increase employee value, reduce costs, improve service, and streamline operations (robotics for factories, self-service kiosks for stores/restaurants, radio-frequency identification, and barcoding systems for inventory control).
Stock Up on What You Can While You Can – fill your shelves and warehouses with readily available source materials/goods from current suppliers and once done make sure and identify alternative resources to minimize supply chain disruptions.
Keep Your Employees Happy – provide employees perks, benefits, and flexible scheduling to keep them happy and motivated.
For more business tips, check out my other blogs. And email me at firstname.lastname@example.org for help with marketing and branding for your small business.