From May 2021 to 2022, the Consumer Price Index in the US increased by 8.6%. This is the most significant rise in inflation since 1981. It’s also affecting other advanced economies, with around 60% experiencing the same problem. Many small business owners are forced to raise their prices due to the rising cost of goods and services. However, this strategy can also lead to the loss of customers. There are several ways that you can protect your business from this issue.
- Try to Lower Expenses
One of the easiest ways to cut expenses is by reviewing monthly service contracts. This will show you any items you can do without. If you’re not using some working space anymore, you can reduce the amount you spend on it. You can also negotiate the subscription price for the services you cannot afford to give up.
- Make Cash Flow a Priority
Having a steady cash flow is very important for small businesses. It can help them run their business smoothly and allow them to make new investments. Unfortunately, many businesses struggle with cash flow. To improve it, try implementing strategies encouraging your clients to pay you faster. Doing so will allow you to be flexible, as your customers also feel the pinch of inflation. Some customers can get an invoice discount by paying their bills early. You can also start offering an upfront deposit for larger orders.
- Lower Supply Chain Risk
A survey revealed that almost half of small businesses had experienced supply chain issues due to rising prices. The risk of supply chain issues is most prevalent among small businesses that provide in-person services, such as contractors. However, other industries are also affected by this issue. A way to minimize the risk of supply chain issues is diversifying your supplier base. Multiple companies that supply different products and services can help you avoid getting stuck with a single vendor.
- Automate All You Can
Implementing technology is another way to deal with inflation. This can help you automate many of the repetitive tasks you’re currently doing. Some apps can help you manage marketing, customer management, and bookkeeping. By implementing technology, you can increase your efficiency and lower your expenses. This can free up valuable time for your employees to focus on more important matters.
- Employee Retention is Important
Besides you, your employees are also feeling the effects of inflation. Due to the rise of cost of goods and services, they may also expect their salaries to increase. A survey conducted by Payscale revealed that 44% of companies are losing their employees due to pay. Your staff members will expect you to match their cost of living.
If you struggle to afford to give your employees a raise, there are other ways that you can help ease their financial burden. For instance, you can let your staff work from home, reducing commuting costs. You can also provide a variety of perks, such as childcare and home insurance. Before you give your employees a raise, you must talk to them about their expectations. This can help them understand how inflation affects their lives and what kind of compensation package would help them.