Inflation has been noticeably increasing for months now. Since the Covid-19 pandemic, prices have been on the rise and they are not slowing down. Everyone has been affected by inflation, with specific effects being the rise in gas prices and food shortages around the world. Small businesses are affected by the rise of inflation as well, with labor shortages and product costs increasing almost daily. Thankfully, there are a few steps that can be taken by business owners to maintain financial stability during this economically tumultuous time.
Running a business is a challenge of its own, but maintaining one during inflation is even more difficult, especially if it’s a small company. Factors like supply chain shortages, rising prices of raw materials, and challenges in finding employees are affecting all businesses, but have been hitting small businesses the hardest. Forbes.com reported that “nearly 40% of small businesses surveyed… feel inflationary pressures surrounding their cost of supplies.” While businesses who have built a stronger financial support system might be able to survive these pressures, small businesses might not have a financial cushion to fall back on amid these pressing concerns. Luckily, there are numerous ways for businesses to counteract the effects of inflation.
Many small businesses have already begun taking steps to maintain financial stability during the rise of inflation. One of the most common ways to do this is to raise product and service prices. With the costs of food and materials increasing almost daily, it makes sense for businesses to raise their prices to maintain profit margins. According to Business.org, “82% of small business owners report that they had to raise the prices of their products or services due to inflation.” Though this step makes the most sense to ensure financial security, it puts businesses at the risk of complaints from upset customers, but there are still other ways to support a business during inflation.
Another step many small businesses are taking is to reduce or change their inventory. Providing fewer or more simple products and services allows a business to cut the costs of purchasing a lot of inventory. Only buying the minimum amount of inventory is also a helpful tool that can be used to save money by not over-purchasing and possibly wasting resources that a business does not absolutely need. In addition, changing certain products or services to specifically target a returning customer base could ensure loyal customers returning to a small business, which ensures some stability as well.
While raising prices and changing or reducing inventory are the two most common business changes being made, there are a few more that can still be employed. Switching to locally-sourced products and materials will help cut shipping costs and add some resource-dependability amongst supply chain shortages. Tracking expenses, hiring a professional financial consultant, or taking out a loan are all different options for small businesses to stay afloat during this economic crisis. Until small businesses have tried one or all of these choices, there is no reason to fret just yet.
Inflation affects every business and individual in some way. Gas prices are rising significantly and supply chain shortages are hitting people hard, and neither seems to be stopping anytime soon. Small businesses are no exception to inflation; in fact they are struggling just as much as everyone else. Luckily, there are multiple steps these small businesses can take before they start to panic.
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