Featured image by Foto-RaBe via Pixabay
If you have ever been curious about the effects of inflation, you may have taken a journey through Google that led you to an inflation calculator. Here, a person can understand how the value of a dollar has changed over time. For example, 100 years ago, one dollar was worth the equivalent of nearly 17 dollars now. This highlights the power inflation holds.
That being said, inflation can cause turmoil in just a small window of time. It does not need a century to greatly affect the stability of a small business. If a company does not have the right plan in place for a change in value, it could signify the beginning of the end.
Alabama senator Tommy Tuberville summed this up. “Inflation is not an abstract idea thrown around by finance gurus,” he said. “Inflation is a very real threat to the pocketbooks of hard-working Americans throughout our great country.”
Since inflation is an unstoppable force, small businesses must learn how to navigate the issue when it arises. This is why we connected with a few small business experts to find out how they are preparing to cope with rising inflation.
RELATED ARTICLE: 6 TIPS TO EFFECTIVELY MANAGE YOUR SMALL BUSINESS’S FINANCES
Tony Chan is the CEO and co-founder of CloudForecast, a brand offering Amazon Web Services (AWS) cost-monitoring software. He believes intentionally finding ways to earn interest for extra cash is wise.
“It doesn’t matter what kind of work your small business does, inflation will find a way to impact what you’re doing. If a dollar becoming worth less than it was previously is the result of inflation, then it seems that the solution should be to identify ways to combat this loss. So how do you increase the value of a dollar? Any account with positive interest. I realize that small businesses don’t have piles of cash sitting around without use for them. But if these businesses can find interest before inflation finds them, they’ll be ready.”
Patriot Coolers specializes in portable storage for beverages. Their business development manager, Marcus Hutsen, suggests paying attention to the endeavors that are proving themselves successful.
“Someone is going to end up financially responsible when inflation takes place. In business, this tends to be the customer, as the companies increase their prices to make up for any difference created by inflation. As a private company, there’s no rule against reevaluating your prices in order to focus on what’s working and capitalize on it. Let’s say you have an item that is selling well but you could be doing more to profit off it. If you’re generating more numerical and valuable sales, any kind of inflation issue will be far less harmful.”
Foster Efficiency and Get Ahead of Inflation
As time goes on, the value of the dollar will drop. However, with time comes technological advances. Hybrid2Go is a business providing battery replacement for hybrid cars. Their COO, Cole Steverson, considers it imperative to take advantage of this.
“Anyone who has dealt with inflation knows that even though a company raises its prices because of inflation, it does not indicate a larger profit margin. Many times, the opposite is true. So how do these companies not only stay afloat but advance themselves? Efficiency is the name of their game. Technology has brought about many incredible innovations that have revolutionized industry after industry. From automation of certain operations to the removal of unnecessary tasks, you can make your work easier, cheaper, and more robust should inflation appear.”
Make Thoughtful Price Adjustments to Counter the Effects of Inflation
Trey Ferro is the CEO of Spot Pet Insurance, a company offering pet insurance plans that help to manage pet health costs. He advises others to look around their business for areas they could eliminate to save money.
“One of the most common things you’ll see in business is companies adjusting their prices as a reaction to the current inflation trends. This is a logical approach to a natural problem. But with it comes its own set of problems. When these reaction changes are made, it can deter a customer base from purchasing the product in the same quantity they were before. This could be simply the sticker shock of the price change or, the price adjustment doesn’t meet the current state of the market. Be sure to be thoughtful when making price adjustments for this reason.”
Greater Than specializes in hydration for pregnant women. Their co-founder, Mark Sider, believes agreements with other companies made over the long term are extremely useful.
“There was once a time where we drove around in our cars with multiple sheets of paper detailing directions for how to make it to our desired location. It got the job done, but it wasn’t the most transparent experience. Then, GPS on our phones came along and made navigating to an unfamiliar location far easier. This example is similar to what happens to businesses who are able to secure forward-thinking deals. Here’s what I mean: If you can lock in all of your costs for the foreseeable future, you’ll have a much better idea of how to budget. Now, you’re working with a much better idea of exactly where your money is going. You don’t have to make it more of a guessing game than it needs to be.”
RELATED ARTICLE: 6 EXPERT TIPS FOR SCALING YOUR SMALL BUSINESS
If a company runs into issues obtaining the physical items necessary to function, its existence may be short-lived. Good Feels is a business providing seltzers infused with cannabis. Their founder and CEO, Jason Reposa, proposes scrutinizing everything related to a supply chain so inflation doesn’t break it.
“Inflation can be a company-killer in so many ways if a company does not have the experience and preparation in place to survive it. But one of the most deadly is the impression inflation can have on supply chains. For instance, if your company is dependent on a sole supplier for a product and inflation causes that supplier to have a shortage, you could be in deep water. Obviously, there are numerous other hypothetical scenarios that could take place so you can’t be ready for everything. But a supply chain expert could help you find priorities to shore up for the inevitable.”
Joshua Chin is the CEO of Chronos Agency, a brand offering marketing services in a variety of capacities. He cautions people not to shy away from chances that may present themselves alongside inflation.
“There’s no two ways about it. Inflation brings change. You may not know what that change is until it happens but change will happen. It’s important to remember that you’re not the only one experiencing this change. Competitors are but so are the customers. Sometimes, change can influence customers’ buying habits in ways that no one expected. If your head is buried in the side to avoid the inflation you’ll miss out on a potential opportunity. Instead, be aware of opportunities when they pop up. Your bottom line will thank you for it.”
Andar specializes in handcrafted goods such as wallets and phone cases. Their co-founder, Eric Elggren, considers it critical to work toward sustainability.
“The nature of business encourages anyone seeking profit to strike while the iron is hot. This is true but with one caveat. If you’re only making the most of an inflation scenario, you’re not going to last long. Essentially, don’t be a one-hit wonder. Investors, as well as your bank account, much prefer continued revenue over multiple years rather than just a lump sum after one short-lived idea. It may take more planning and readjusting than you thought, but it will be well worth it.”
There is nothing beautiful about the beast that is inflation. It has the ability to take any business out at the knees. This is why preparing for it is absolutely necessary. Investor and author Marc Faber spoke to the power of inflation: “Buy a $100 U.S. bond and frame it to teach your children about inflation by watching the U.S. bond value diminish to almost nothing over the next 20 years.”
Get more good ideas for keeping your business thriving during difficult times by bookmarking our home page and browsing our blog often.