Small businesses can also face rough roads, such as inflation. It is when there is an increase in the price of goods and services. In this case, even small businesses have to think of ways to cope with such a situation. It might be a wise decision to keep the business steady at times like these. For this reason, the owner and the rest of the team have to join hands to adjust the current system of the business to keep it going.
For small businesses, it is not only about the costs. It is also about the credit the owners made to fill in its needs. Aside from that, their liquidity doesn’t come from banks but suppliers, instead. As you can see, inflation can massively affect a small firm. As a result, they will pass higher input prices to their customers.
In this case, small firms can do actions that will help not to lose their loyal customers due to price hikes. Keep reading and see what you can apply to your small business during an inflation period.
Ways to Survive Inflation
Your business can suffer if you will not be wise in your strategies. Here are a few things that you have to consider while dealing with the rising prices:
1. Review of the company’s finances.
You have to analyze the firm’s financial position. You must know how the business is going. This way, you can have a clear picture of the firm’s financial health. In effect, you can make wise decisions on directing your team and the firm. Below are the things you need during the analysis of the firm’s financial status:
- Balance Sheet
- Income Statement
- Cash Flow Statement
- Financial Ratio Analysis
Having all of these can help you think of your courses of action. It will determine how stable your firm is.
2. Scan through your contracts and terms with suppliers.
Look into the contracts and terms you have with your suppliers. Review them and see if you can renegotiate their contents. In this case, you can ask your suppliers if they can give you discounts. They might consider it if you pre-order, pay earlier, or buy in bulk. You only have to talk out a good deal for them to agree on your request.
3. Re-think your pricing strategies.
Some business firms need to increase prices to help them cope with inflation. However, other firms cannot do this because they will lose their clients. Releasing a new range of products can help them set a higher margin. But if the only option is to raise prices, owners have to be keen on their competitor’s price ranges. Pricing your products higher than your rivals can make you lose your business.
4. Be transparent with your customers.
It is also a better approach to explain to your customers about your price increase. Sending them a memo about your price hike can help them understand the reasons behind it. As a result, they are likely to accept the price changes and stay loyal to your firm. In effect, you can maintain that strong tie with your clients.
5. Plan for your cash needs.
Your business will need upgrades in time, such as installing new commercial fire doors. It is a part of keeping your business safe. For this reason, you have to list down all the business aspects that will require funds sooner or later. In this case, getting a business loan can help you attend to your fund needs. You have to forecast your future needs and plan where to get your funding.
6. Focus on expenses.
Cut back on non-essential expenses. That is why you have to review your finances. This way, you can track down all the outgoing costs and decide what you can cut. Every penny counts for your business, especially during inflation. But then again, it is wise to improve your business to achieve lower outgoing expenses and reduce wastage.
7. Think of ways to boost sales.
It sounds like an obvious need for a business. But it is more necessary while there is inflation. At this point, you have to extend your marketing efforts to your current clients. During this period, your only hope is to keep your existing customers loyal to your firm.
In general, inflation can affect a business, no matter how big or small. Every owner has to prepare their business for such situations. Having a contingency plan can help them act fast and stay ahead of the competition in the industry. As a result, they can minimize the risks associated with inflation.
