Surviving The Inflation: Keeping Your Business Afloat
Jun 16, 2023
Over the last two years, the world has seen an extreme upsurge in prices for food, energy, transport, and accommodation. Businesses are among those that are deeply affected by this inflation. Central banks and the government became the temporary ground for them to keep afloat with trillions of funds for support, but that did not stop the other stressors from causing them to go bankrupt or shut down. The pandemic has caused manufacturing factories and retailers to downsize or halt due to COVID-safe rules, which impacted the supply chains.
By 2021 when the lockdowns ended, the global economy grew at its fastest post-recession pace in 80 years. The recovery boom overwhelmed the trading system and caused a spike in costs. Fast forward to 2023, experts are expecting lower inflation rates. But for small business owners, you may continue to struggle to keep up with the market’s uncertainties and fluctuating exchange rates. Here are some anti-inflationary measures to approach the year with stability, and keep your business afloat;
Inflation will drive your business to spend more money on supplies, shipping costs, and tariffs on international sales (if it involves imports and exports). It will also disrupt your cash flow which will make meeting short-term obligations like wages and lease payments hard for you. The most obvious solution for the rising costs is to raise your prices—especially on the products that have the best impact on your profit margins. Your customers are more likely to purchase your bestselling items, despite the price raise.
Shrinkflation is a similar and stealthier approach to raising your price. It involves subtly changing the fine print of your product—packaging, contents, or the supplies or ingredients that make it. Big brands have also taken this approach last year. For instance, Doritos downsized their products by five chips per bag, dropping to around 262 grams from 276 grams. Even the best price-sensitive consumers could not detect this, so consider this approach for your small business.
Automating your business operations is ideal if you want to increase your employee’s value and improve customer service. Not only does this streamline your processes, but it can also offset the effects of inflation as labor costs are reduced. Investments in technologies—such as intelligent document processing, self-service kiosks, RFID, and barcoding systems for inventory control—have proven to be convenient in times of crisis.
Product and supply stock-up
Another effective approach is to stock up your shelf and warehouse with supplies and products while their prices are still low because they are sure to surge over time. However, this action should be taken with precaution to avoid excessive spending.
Loans play a pivotal role in your business but when inflation is on the rise, it is important to differentiate between a good loan and a bad loan. It is advisable to pay down high-interest credit card debt right away or at least transfer it to cards with lower rates. Otherwise, refinancing high-interest loans into a fixed-interest rate loan with a longer term can be a better alternative.
Improve employee retention
Labor shortage is another problem that comes with inflation. Losing your employees at this time would mean that you will spend even more money to advertise open positions, hire and train new staff, and onboard them. At that time, you will also be unable to meet your customer’s demands on time. To keep your employees happy, find out what they need in terms of perks, benefits, and scheduling.