The future of small businesses is at risk, now that inflation rates are rapidly rising across the world. The World Bank reports that 15 out of 34 countries classified as advanced economies are suffering from an inflation rate that’s higher than 5% over the past 12 months. Alarmingly, as many as 78 out of 109 countries recognised as emerging markets and developing economies have inflation rates that are above 5% as well.
Given that inflation is a global problem, small businesses need to adapt quickly so that they can survive and thrive through the economic downturn. To maintain the stability of your small business, here are the strategies that you need to follow:
Identify opportunities for greater savings
You can cover the rising costs of necessary expenses by adjusting your budget accordingly.
Because financial management is even more challenging during times of inflation, it’s important to do your budget research properly. An article on inflation by AskMoney outlines how it increases the prices of assets over time. This means that small businesses need to keep track of their expenses to ensure that inflation isn’t causing their profit margin to drop. In some cases small businesses will need to do some cost cutting. Your cost cutting can start with an energy audit in your business or home office, as utility bills can consume a significant portion of your earnings during inflation. You can also leverage rewards cards or programs to cut costs on gas. On top of that, government websites can also offer business guides that can help entrepreneurs manage finances and prepare for emergencies, so funds can be properly maximised during inflation.
Improve the operations of your business
You can also earn extra money to cover the rising costs of goods by improving the offerings and processes of your business.
Since only 40% of small businesses are profitable, Entrepreneur recommends that you increase your earnings by learning how to market to your consumers. You can start by finding more customers through digital marketing and by reaching out to prospective consumers that you find online. Aside from increasing your marketing efforts, you can also offer more products and services to attract different target markets. By trying out new strategies and offerings, you can increase the profit of your business.
Be strategic in raising prices
Businesses are raising the prices of their products, since Reuters noted a 3.5% price hike in food products, and a 2% increase in non-food prices. Unfortunately, NielsenIQ revealed that British shoppers are visiting different groceries and stores to find the cheapest prices.
So if you want to raise your prices without losing sales, you can try to study your competitors and compare your planned price hike against theirs. Once you’ve figured out a fair price for your products, be honest with your customers about the increase and reassure them about the quality of your offerings.
Inflation is a big challenge for small businesses. But through the right business strategies, you can allocate your funds properly and survive through the inflation. For those starting a small business it is a challenging endeavour, so do read our post ‘Small Business Starter Pack: What Software Will I Need?’ for further tips.