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Small business defence against inflation Posted on May 14, 2022
Inflation is the latest concern for small business. Levels in the USA are concerning, and while it is not as bad here in Australia, trends such as higher cost of living and increasing interest rates have us all on alert. The current inflation rate is 5.1% – Small businesses need space and opportunity to rise out of crisis control and into the growth zone. Here are some positive strategic steps…
A blanket price hike is rarely well received by customers, however there are some more palatable pricing strategies that will help you to recoup rising expenses. You might consider a loss leader strategy, which is when you identify a key product and accept running it at a loss, but cross promoting other high value products/services and overall increasing the breadth of your sale. Focus on high margin goods and services. Small scale increases in short intervals can help too, and feels less offensive than one big jump.
Many small business owners feel forced to offer high wages to attract and retain talent, and to give regular pay rises. The impact on your bottom line is significant and irreversible. However, if you take the time to know what motivates your talent, you can offer competitive packages through incentives such as flexible hours, wellbeing initiatives, professional development and more.
Renegotiate supplier contracts
It is possible that you have fixed your agreements with suppliers, and it is likely arrangement was made when the environment was very different. It is reasonable to request a renegotiation of a contract if it means keeping the professional relationship healthy, strong and mutually beneficial. It’s no good for your supplier to lose a good customer.
It is also hugely beneficial to diversify your suppliers. Too many small businesses rely heavily, if not solely, on one or two suppliers. This means the customer is at the supplier’s mercy in relation to quality, supply and price. Diversification keeps the competition for your business strong and healthy.
Streamline your cash flow processes
It is critical that businesses have up to the minute debt and credit information so they can make informed financial decisions for the immediate and the future. We are platinum members of Xero and proficient in other systems that not only make life easier for business owners, it saves them money. If you don’t have this in place, or don’t believe you are operating it at its maximum capacity, please speak to us.
The last point is to consider the human side. When announcing a price change to your customers, discussing wages with your team or a new contract with your suppliers, remember the financial pressure they’re feeling too. Go gently and be sympathetic yet honest. Financial communication is a difficult message, and can easily offend the receiver. It can be beneficial to get professional support before you fire anything off.
If you need to arm your business against the threat of inflation and need strategic tailored advice, please give us a call or email for a complimentary Discovery Meeting: [email protected]