Running a small business can be very rewarding, but it’s also a challenging endeavor. There are a lot of unexpected behind-the-scenes tasks required to keep a business running, and dealing with inflation is one of them.
Knowing how to deal with inflation can be a ‘make or break’ situation for a growing company. Inflation feels constant, and as a business owner, you need to track it at all times and react appropriately. Raising prices is one of the most popular suggestions when discussing how to survive inflation, but it’s not your only option. Stick around, as we’re going to look at how to protect your small business through inflationary periods.
How Inflation Impacts Businesses
Inflation can seem like a complicated topic that only bankers, economists, and stock traders can truly understand, but it’s something that small business owners can easily get a handle on. Inflation occurs when the general price of goods and services rises. The severity of inflation is measured with the Consumer Price Index (CPI), which is overseen by the U.S. Bureau of Labor Statistics.
A classic consequence of inflation is a drop in purchasing power. That means you’ll get less for your money compared to a month ago.
Inflation impacts companies because they have to work harder to balance their supply with the demand from consumers as well as plan for rising expenses. Companies also have to pay their employees more, as high inflation rates mean bigger bills for employees.
Currently, the inflation rate stands at 6.5% in the U.S.
What Actions Should Businesses Take Before Inflation Increases
Before we discuss how to combat inflation, let’s look at how small business owners can prepare for rising inflation. A few ideas include:
- Reduce resource consumption
- Scrutinize your spending habits
- Try to lower shipping costs
- Resolve any supply chain issues
- Put strategies in place to increase employee retention
- Invest in ROI-driven marketing that will secure you new customers
5 Tips to Help Small Businesses Survive and Thrive During Inflation
Now that you have a basic idea of inflation and how to prepare, let’s look at steps to take during periods of high inflation — how to deal with inflation in a business, how to protect your business, and what to do when things get tough with rising inflation rates.
1. Reduce Expenses When and Where Possible
The first piece of advice we have is to look at your business expenses and then cut back on these expenses wherever and whenever you can. Some expenses to look at could be purchasing cheaper office supplies or evaluating your business insurance to see if you could get a better policy for less money. If you’re struggling with looking at your finances and where to cut costs, consider working with an accountant to fully understand the scope of your business’s finances.
Understandably, there are many expenses that can’t be avoided, but the ones that aren’t necessary to keep your business running should be examined very closely.
2. Leverage Automation
Automation is great for any business, and when the time comes to lower costs and become more efficient, it’s the key to success. Small business owners should aim to streamline and automate as many business processes as they possibly can. Depending on your business, there are a variety of things that can be automated, from sales to leads outreach. Take a look at your current needs and what can benefit from automation – you may be surprised by what can be automated with a quick app.
3. Keep an Eye on Cash Flow
Your cash flow can easily get out of hand during tough inflation situations, so make sure you’re keeping a close eye on it. If necessary, supplement your cash flow with a business loan from a reliable lender like Idea Financial.
4. Raise Prices Slowly and Strategically
Price increases are going to be inevitable, but don’t overwhelm your customers with a big increase. Instead, raise prices strategically and over a long-term period. Maintain customer goodwill and loyalty by being strategic with your price increases.
5. Take Out a Small Business Line of Credit
A business line of credit can be your savior. With a line of credit, you only have to pay back what you use, so you’re able to spend only as much as necessary to keep your business afloat. It can help you pay big bills, buy more stock, and funnel money into marketing.
How Idea Financial Can Help You Combat Inflation
Idea Financial’s business loans and lines of credit can be very useful to a business during a recession. Growing sustainably during economic uncertainty is incredibly difficult, but with expert financial help, it’s much easier.
With a line of credit from Idea Financial, small business owners can get same-day approval and next-day funding. Idea Financial offers funding of up to $250K.
You can withdraw what you need, pay it back, and then borrow more if necessary. You are only ever expected to pay interest on the amount you spent, so you’re only charged for the money you’ve actually used.
Knowing how to overcome inflation in your business is great, but without the right plan and backing, it’s near impossible to truly make the most of this knowledge. By