An inflation rate more than four times higher than the Fed’s target is causing a shift in buying behavior, resulting in significant disruptions to businesses already coping with supply chain issues, labor shortages, and other pandemic-related challenges.
So, what can small businesses do to survive tough economic times? Here are some ways companies can adjust to periods of rapid inflation:
- With fixed costs (supplies, rent, payroll, etc.) increasing, business owners must adapt. Changing where essentials are bought, relocating to more cost-effective space, and integrating more efficient technology may provide some relief.
- In March 2022, approximately 4.5 million people left their jobs, so workforce shortages are an issue for many companies. Counteract that by offering creative benefit packages to attract new employees and retain current ones, understanding that while competitive wages and higher salaries are the main motivators for those in the labor pool, they aren’t the only ones.
- Raising the prices of goods and services is one way to offset cost and expense increases. According to the U.S. Chamber of Commerce, nearly 70% of small businesses raise their prices to combat inflation.
- Businesses are also decreasing their inventory to save on costs. One drawback of this is that companies hold less quantity of a particular product, which can be an issue when they have to tell customers a specific product is out of stock. But overall, maintaining a low inventory reduces spending and causes companies to only buy what they are sure they can sell.
- In addition to minimizing inventory, some businesses are also reducing the number of products and services they offer. Many are discontinuing certain products or temporarily halting more costly services until they can catch up.
- Many owners and entrepreneurs have taken pay cuts to keep their businesses afloat. Because they are entering tough financial times, bosses are willing to give up a portion of their salary to reallocate to other parts of the company – employees, marketing, rent, etc.
Despite rising inflation rates, overall sales numbers have not been terrible, with nearly a third of consumers reporting no change in their buying behavior. Additionally, inflation models are predicting a drop, to 2.6%, in 2023.
If your business would benefit from financial expertise in these challenging economic times, please be in touch with TAP Financial Partners. Our team of professionals can provide personalized assistance and solutions tailored to any situation.
Interested in learning more? Get in touch with us today.
# # #