During the first quarter of 2022, 85% of small business owners said their business was being affected by inflation, and 67% had already been forced to raise prices, according to the U.S. Chamber of Commerce.
Inflation can be catastrophic for small businesses, and many owners are worried. However, small businesses can be more flexible and responsive to shifts in markets and in demand than their larger counterparts. They are able to meet local demands easier.
So, how can you deal with rising costs, falling profit margins, and increased lead times? Here are some steps you can take:
- Resist the urge to wait it out. Financial adjustments may be needed. It’ll take awhile for things to get back to normal.
- Streamline and automate processes. This could mean organizing products with new shelving or using new software to automate order taking, billing, and collecting payments.
- Analyze profit margins on a product or service basis. When did you set your prices on products or services? Are you regularly reviewing these prices to make sure they’re adequate? Review margins at least quarterly.
- Improve productivity. Work more efficiently and your profit margins will be higher. Take a look at technologies that track and improve productivity.
- Look for opportunities to save. If your business is paying for products or services that aren’t being used, cancel those items. Consider substituting materials. Take a look at office space, can moving to a hybrid remote/in-office model save you money?
- Stock up on supplies now. Don’t wait until the last minute to order core materials. This may also save you money while prices keep rising.
- Develop a process to raise prices. No one wants to raise prices, however, this may be helpful in combating inflation’s effect on your business. During this period, it’s useful to build in additional wiggle room, as it’s not feasible or advisable to change prices frequently. Choose areas where customers are less likely to notice.
- Be ready for new customers. Your target market may change, so go after those new customers.
- Be flexible and put your business first. Resist accepting smaller margins to assist your customers through this difficult time. The business will not be able to sustain the resources it needs to survive. If you fail, this hurts you, your customers, and your community.
And, lastly, the Center is here to help. Call our business development specialists for assistance: Raul at 308.833.0260, Vicky at 402.380.3353, or Brissa at 402.870.2749.