The Essential Small Business Guide To Managing Rising Inflation

Businesses of all sizes, not just small businesses, are facing the added challenge of higher inflation rates in 2022. Those without extensive teams or massive inventories may be feeling extra vulnerable as consumers across the nation look more closely at how they spend their money.

 Now is a good time to reassess your business strategy and adjust as needed. Here are seven tips to help you overcome rising interest rates and cautionary spending so your business can still thrive.

1. Streamline Business Operations

In uncertain times, productive work reigns supreme. With layoffs and stalls in hiring becoming a reality for many small b businesses, getting as much done as possible with the team you have now is key.

 If your small business is brick-and-mortar, break down your operations step-by-step. Rank activities based on outcomes and importance. Are there ways to be more efficient? Can you shift responsibilities to make better use of people’s skills and time?

 Even internet businesses can streamline by leaning on automated to run things like their social media platforms, payroll operations, POS systems, and more.

2. Cut Costs

When inflation strikes, start with the expense sheet. Look at where money is going out the door and double down on whether it's crucial for your business. Inflation, to many, means laying people off or downsizing to cope with increased costs. But you can effectively give your business's budget a "pay raise" simply by lowering your monthly expenditures.

 Similar to streamlining, cost cutting should be ranked in terms of importance and measured for outcomes.

3. Prioritize Your Most Profitable Products

What are your blue chip products? What SKUs or services in your business offer the highest yield or greatest profit margin? Focus on these during times of high inflation.

 If your business only offers one or two products/services, look at which might be more successful when inflation makes people pinch their pennies even more. Skew your advertising dollars or promotional budget towards the one item—and simultaneously look for ways to increase those profit margins by focusing on value.

4. Watch the Cash Flow

Cash is oxygen for any small business. In the same way that investors place their cash in less risky assets like savings accounts or bonds when inflation hits, you can alleviate fears in your small business by prioritizing increased cash flow during uncertain times.

 It doesn't simply have to be that you reward customers for paying in cash, either. Offering better incentives does help, but so does setting a cash budget and sticking to it, cutting spending, and limiting borrowing options.

 A good merchant processing service can put more cash in your pocket and keep that rainy day fund strong.

5. Create New Customers

It's no secret in business that it's cheaper to keep a customer than it is to acquire new ones. But sometimes expanding your loyal customer base can really help, especially in times of inflation. Review your outreach efforts to get a sense of your return on investment for everything you've been doing. Expand your investment in the efforts that have done well at bringing in customers while scaling back on those that are lagging.

 The benefit of adding new customers is that other adjustments you make to cope with inflation, such as raising prices or cutting costs in your business, won't be felt by newcomers (so long as you're still delivering, that is).

 Increase Prices

When you’ve cut your costs as much as you can, and you’ve made all your processes as productive as possible, there’s one more place to look to protect profits. It’s in the pricing. As with everything else, pricing should be a part of your overall strategic plan. You want to consider what you need to cover your costs as well as the consumer’s willingness to pay.

 Some businesses build in small regular price hikes to avoid jumps while others have intentionally kept prices low to attract business. If you find that a large jump is unavoidable, there are ways you can do it without losing customers such as:

• Creating social media content around the value of products relative to other options despite price increases.
• Building brand loyalty by involving customers and being personable.
• Bringing all team members up to speed on changes and how it will affect business operations.

 Looking ahead at where you want to go with pricing will give you more options. It will help also to analyze buying trends for your products, which you can easily if your payment processing solution has built-in tracking.

 7, Take a New Approach on Pricing

Rather than looking at pricing from a pure transactional standpoint, assess it on a value basis, and ask yourself questions like:

• What value can you add that justifies an increased price tag?
• What additional needs could I meet for consumers?
• What services can be streamlined or improved?
• What add-ons can be included in the new price?
• What programs, such as loyalty or cash discount programs, could I integrate into my business?

 Contact us today to learn more about how you can save money in your small business by upgrading your payment solution services.