Inflation: 7 Tips to Help Small Businesses Ride Inflation

Being a small business owner during the last two years has come with its set of challenges, and now rising inflation. According to the Bureau of Labor Statistics, U.S. inflation surged to a new four-decade high of 8.5% in March from the same month a year ago, driven by skyrocketing energy and food costs, supply constraints and strong consumer demand.

These new challenges create a series of new headaches for small business owners, like worrying about the financial health of their companies and decreasing profit margins. Although increased wages have not kept up with the high cost of goods, inflation can be a scenario that can be planned for with the right business strategy. As small business owners, we cannot predict the future, but we can plan by learning from the past and preparing in the present.

Today’s small businesses need to be creative in their approach to dealing with inflation, as it may not be likely to go away anytime soon. Here are seven key strategies to ease inflation’s effect on your small business.

1. Streamline and automate your processes. Take a moment to take inventory of how you are doing things. Review how you develop your product, who your customers are, and how much it is costing or benefiting the business. This practice will help you find ways to lean your business to be as efficient as it can be.
2. Analyze your profit margins. Review your financial statements frequently and find patterns where possible. Many times, you will see that one product sells more than another. What would happen if you invested a little more marketing on that? This could bring you more revenue and help you build up your financial coffers.
3. Improve your productivity. The more quickly and efficiently you and your employees work, the higher your profit margins are likely to be. Use technologies and apps that track and improve productivity.
4. Cut expenses where you can. During an inflation period, frivolous spending will reduce your financial potential to ride out the increased cost of things. Consider downsizing in your office space, selling more online, or finding a hybrid schedule that minimizes transportation costs. Also, check with your vendors and review how much you are spending for supplies and services by doing a cost comparison periodically.
5. Build up your supplies now. Supply chains could further delay the delivery of your supplies to provide a service, and prices keep rising. Review your sales patterns and plan ahead so as to avoid delays in your sales delivery process.
6. Raise your prices to the market level. It may sound like a counterproductive idea, but it may be helpful in riding out the effects of inflation on your business. Do your homework first and raise prices thoughtfully. You want to raise your prices slowly in modest increments by being strategic. Explore your sales menu to find areas of improvement.
7. Open yourself to new customers. With inflation come new solutions and opportunities to create new customer segments. Look at how your customers are referring your services to find ways to innovate your offering to meet all budget types. Create new product categories to reach new customers by following trends. This will ensure you are at the cutting edge of your industry.

Inflation is an unfortunate result of economic conditions affected by rapidly changing issues in our geopolitics, climate and many other market pinchers. But despite that, trying time-proven financial techniques can help any small business owner establish a sound foundation to be prepared for changing times like today.

EDGAR RAFAEL OLIVO is a bilingual business educator, economic advisor, and contributor for several media outlets. He’s a nonprofit executive who is passionate about education. He is certified in finance and data analytics and holds a business degree from Arizona State University.

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