Staying Afloat: Tips on Surviving Inflation for Small Businesses￼
The Consumer Price Index (CPI) climbed 1.3% between May and June in 2022 in the biggest one-month jump since 2005, and it’s only expected to increase over time. As a small business owner, you’re already dealing with tight profit margins, so the added pressure of inflation can make it tough to stay afloat. Fortunately, there are strategies to help you weather the storm.
Inflation can eat into your profits, so having a cash cushion to fall back on can be a lifesaver. Keep a few months’ worth of expenses saved up to give you some breathing room if business starts to slow down.
Keep Valuable Employees
Wages inevitably rise with inflation, so it’s important to keep your best employees by offering competitive salaries. Providing benefits and steady work will lower your staff turnover, which may cost you a bit more now, but will help you to save on training and induction expenses, in the longer term.
Improve Profit Margins
If your margins are tight, now is the time to start looking for ways to improve them. Evaluate your strategy and see if there’s room to increase your prices without losing customers. Search for cheaper alternatives for your supplies and materials that won’t compromise the quality of your products or services.
Technology can help you save time and money. Automating repetitive tasks will free up your employees to focus on more important tasks that will lead to growth and new sales. Search for software or free online tools that can assist in this regard.
If you’re struggling to make ends meet, a business loan can give you the financial boost you need. Shop around for the best rates and terms but be sure not to overcommit to a debt you won’t be able to recover from.
Stock Up on Supplies
If your business makes use of non-perishable supplies, it may be worth stockpiling some items. This way, you’ll avoid having to pay higher prices down the road, and if resources become scarce due to global tensions, you’ll have the breathing space to find alternative solutions.
If you can find ways to increase productivity, you’ll cut down on expenses and automatically start seeing growth in profits. Check if there are any bottlenecks in your process that you can eliminate and use productivity trackers to monitor the effectiveness of how your staff spends their time.
Use Accounting Software
Accounting software can help you keep track of your finances and ensure you’re making the most of your money. It will also reduce the risk of payroll errors that have the potential to hurt your business in ways you can’t afford. Opt for a free software solution to avoid paying a monthly fee for this service.
Marketing and paid ads are undoubtedly expensive, however, with the boom of digital solutions, there are plenty of low-cost options available. A banner maker, for example, can allow you to easily design banners online for your website and other marketing material to improve your efforts to reach your target market without spending on costly software.
Dealing with inflation can be a challenge, but it’s not impossible. If you’ve invested time and money into your business, you’ll want to do everything in your power to avoid liquidation, so it’s vital to be proactive rather than reactive. Start by identifying the biggest problem areas in your existing business model and you’ll soon find yourself easily sustaining profits.
By Lisa Walker