Remember that nice pair of sneakers you got at the store last year for a few bucks? Well, go back to that same store and ask for that pair again — I bet you won't get it at that price again.
Why? Inflation happened.
Inflation has gradually become a recurring word in the vocabulary of many business owners today. The unabating rise in the value of common goods and services is also a cause of worry for regular individuals who seemingly pay more for less.
If you own a business, you must bear the rising inflation levels. It is worrisome that small business owners not only rake in less profit than before, but they'd also have to face a rapid decline in the value of their currencies.
In the US, current inflation rates are well above 8% - a significant increase compared to its level last year at 5.25%. Owing to this, the US has been making drastic efforts to reduce the number. Since 2012, the Federal Reserve has had a target of 2% for inflation rates in the economy, but this number isn't close to current rates.
Considering the incline in inflation, business owners would have to make tough decisions if they want to keep their businesses afloat. This article will examine five ways to protect your business during these inflationary times.
The Effects of Inflation on Small Businesses
Depending on your company's industry, inflation won't affect all businesses the same way. Factors like the strength of your brand, the types of products you provide, and your location might influence how inflation plays out.
For instance, products and services that are considered essential are less impacted by inflation. This is because these products would always be needed.
Consumers might decide to boycott less critical goods and services just to keep up with the demands of the essentials.
Industries like food, real estate, gas, and others fall within this category - consumers can't just avoid them.
In addition, competition in business plays a part in the effects of inflation. This is a simple testament to basic supply and demand. If consumers can check out other businesses that offer the same products and services as you, inflation could have a more significant impact, especially if these alternatives provide cheaper rates.
However, on the other hand, if there are fewer alternatives, your business will experience a less severe impact.
Inflation affects small businesses in two ways.
Increased overhead costs.
During inflations, prices of goods and services are meteoric. It will become increasingly difficult for businesses to take on basic expenses like transportation, purchase of raw materials, and management costs.
While there are arguments that the bulk of inflation would, in the end, be absorbed by consumers, businesses without sufficient funding might become bankrupt if they cannot handle daily overhead costs.
A decline in Purchasing Power
This indirectly affects business owners by inflation. During inflations, consumers, mainly the top revenue sources for businesses, might not be able to spend how they used to. Most individuals resort to cutting costs and even boycotting less relevant expenses as much as possible.
In return, business owners make fewer sales which shrink their average revenue.
5 Ways Your Business Can Fight Back Inflation
In the face of inflation, a business with more cash would easily navigate the turmoil than a business with crippling financial backing.
Here are five sure-fire ways to protect your business and combat inflation in 2022.
Expand Your Reach
As we mentioned in the previous section, one of the primary effects of inflation is that it smacks down the purchasing capabilities of your consumers. In other words, they will find it difficult to give you as much money as they used to in exchange for your goods and services.
One of the ways to check this is to introduce a widespread outreach for your business. You can do this by investing in social media marketing campaigns; even fliers can do much. Whichever route you choose, ensure that your marketing budget is carefully planned.
Capital is the soul of any venture; your business could easily wrap up if it's wasted. It is crucial to keep a careful eye on expenditure, and since inflation reduces profitability, it's best to stick to only the right type of costs.
Keep in mind that overhead costs would take a while to peak down. Therefore it's imperative to keep a major expenditure sheet.
Be Innovative and Flexible
To keep your business running during inflationary periods, you need to be open to new ideas and be innovative. This does not imply that you should take on uninformed acquisitions or decisions without guaranteeing cost-effectiveness.
While demand for your products and services will likely decline, this is a good time to experiment with good product mixes. For instance, boutiques can resort to selling face masks alongside other apparel. Also, eliminating low-performing products is a good way to stock up on more necessary products.
The times are changing as more and more businesses are tilting to modern technology. Opting for technological alternatives for your business is a good way to keep your business afloat.
A good perk of using simple technology in your business is its cost-effectiveness. You can also decide to develop a strong presence on social media and engage with a more extensive audience there who might turn out loyal customers.
Focus on Positive Branding
Instead of increasing prices, you can offer more benefits to your customers through efficient branding techniques. During inflations, it's expected that consumers would want to explore more outlets in search of cheaper ways to get products and services. You can capitalise on this as a smart business owner by providing additional offers to entice prospective customers.
Of course, this doesn't mean you shouldn't increase the price of your products or services. Rather, improving your offerings takes the customer's eyes off the price as the focus is now on your offers.
It is expected that inflation would directly or indirectly affect the pace of doing business. If you're a new business owner, staying calm and reviewing your options is important.
It's important to focus on improving your business to keep customers happy and maintain a healthy relationship with your team. Innovation is a great key to unlocking the positives of an inflationary market. In the future, you'd be glad you navigated your way well enough through inflation — your success story would inspire someone.