Strategies for Small Businesses During Times of High Inflation
Let’s face it – inflation is on everyone’s mind these days. We are well beyond the time when we were told the inflation our economy was experiencing was merely transitory, that it would be gone before we knew it. Now we feel like we may never see the end! While we all know that that is not true, none of us knows when it will get significantly better. Small businesses cannot afford to just wait and hope that inflation cools soon. In a high inflation economic environment, here are some strategies that small businesses can use to deal with reality.
Cut Unnecessary Expenses
When times are good, businesses tend to become more lax in discretionary spending. This is only natural because funds are plentiful and more is coming in all the time. But when times get harder, such as in times of high inflation, there just isn’t as much money to cover the excess expenses. That makes this the perfect time to evaluate your monthly spending and see just where every dollar is going. You might find that there are some subscriptions or services that seemed indispensable last year, but today seem rather unnecessary.
Reduce Supplier or Manufacturing Costs (When Possible)
As inflation rises, chances are your supply and manufacturing cost are rising too. That means that even though you may be charging the same for your products, you may be getting a smaller profit from each sale. If you feel like you are getting squeezed between rising costs of inputs and lagging sales, it might be a good time to renegotiate your contracts with suppliers or try to find additional efficiencies in your manufacturing process. Usually with closer examination, there are at least some savings that can be made.
Rely on Partnerships
Having reliable partnerships is always a good thing. During times of high inflation, it is even better. When expenses grow and margins shrink, smart small business owners look for ways to get more for every dollar spent. Sometimes there are ways that businesses can partner to share costs like transportation or rent. Even buying supplies in bulk and then splitting them can keep costs down. Or exchanging services at a reduced rate can allow businesses to continue to grow without spending as much.
Leverage Technology
Of course, this conversation would not be complete if we didn’t mention the role of technology. AI and software applications have completely changed the look of day-to-day operations in the last 20 years. Technology can often help businesses operate with fewer employees, less external expenses, and less wasted time. Many times businesses can implement new technology without incurring a great deal of cost, and these innovations can save both time and money while also improving customer experience as well as employee satisfaction.
While high inflation is never welcomed or enjoyed, many of the given strategies can actually make a small business stronger, more efficient, and more profitable in the long run. With a little thought and hard work, small businesses can emerge from inflationary periods even better than before! As always, remember that Federated Bank is here with the reliable banking services you depend on, no matter what the economic conditions may be.