Inflation, inflation. We hear the word being mentioned all over the news and in all the papers. But, do you know how inflation impacts your business?
According to the National Federation of Independent Businesses – inflation is the top challenger facing small business this year. They found 70% of businesses are having to increase their prices due to higher costs.
Although prices are seemingly starting to flatten, the overall impact of inflation will take some time. As of July 2022 we were at 8.2% inflation nation-wide.
It could take as long as a year and a half before we really see any significant controls and the affects been put in place by our government.
This naturally has a domino effect. With price increases across industries, businesses have higher costs, and your margins start to run thin, resulting in lower profits through the mid to long term.
We have started to see this impact businesses in the following areas:
- Food costs
- Interest rates
All in all, it costs more to run your business.
On top of this, in many cases employee morale has been indirectly impacted due to the stresses of their expenses. Not only does this mean unhappy employees, this could negatively impact their productivity.
Overall, a gloomy prospect for all, from staff, suppliers and customers, to business owners.
Deciding The Strategy
Now that you have a better idea about how inflation impacts your business, what should you do about it?
Here are a couple of strategies that you can use to reduce the negative impacts of inflation, and even turn it into something positive!
- Leverage your customer relationships.
- Make sure you have a good accountant / financial advisor on board.
- Keep communication channels open with suppliers, customers and staff.
- Keep your inventories under control, overheads low and cash balances as high as possible.
- If it’s possible keep your prices the same or minimise increases. Ensure to inform customers of this as it will increase customer and brand loyalty while being an excellent marketing mechanism that you can promote.
Speak to your financial services provider/accountants to see how they can help you decide what works best for your business, and where to focus your energy.
During times like these, it’s always important to remember the reason why we are here, the service or products we provide – The Customer.
Always ensure that whatever strategy is put in place, it doesn’t or should never have any negative impact on your clients. Keep your staff well informed of the strategy and ensure that they too are being informed as this will help everyone stay on the same page.
Your inflation-busting strategy should still meet your customers’ expectations. Ensure that their experiences and expectations are your top priority.
Happy clients = Happy Business