All business owners need to know how to deal with inflation and recession while keeping their sanity.
According to research, 85 percent of small business owners say that they are worried about rising inflation.
If you're in a similar situation, you don't need to panic. You can learn how to deal with inflation and a possible recession while also maintaining your sanity.
Review Your Pricing
First, you'll want to review the pricing of your products and services. Inflation is generally related to the operational costs of your business, so if those costs are going up and you're not increasing prices to maintain your profit margin, you might consider raising the price of your product.
However, this will depend on how much you're going to raise the price. If you raise it too much, you risk losing valuable customers who might not see any value in your service or product when you raise the price that much.
You'll need to do some market research and figure out where your product sits in the market and what people might be willing to pay for it. Smaller businesses normally don't have enough leverage to influence the entire market, so some of it will be dependent on what other businesses are doing.
You should also look at your competitors to see if they're raising their prices. If so, maybe you can raise your prices and still be competitive with them.
If you decide that you do need to raise your prices, then the most common strategy is doing a blanket increase. This way, everything will increase gradually.
You can also try doing some creative pricing strategies, like offering installment payments, removing some features, or bundling different products together to make them seem more affordable.
Any decision you make on your pricing shouldn't be based solely on inflation. This is as much about psychology as hard numbers. If consumers are expecting that everything is going up, you’ll find less resistance to raising prices.
Minimize Costs Where Necessary
Reducing your costs can save money in a recession, and may help you avoid raising the prices of your products. By keeping the prices low, you'll be able to preserve customers and promote a positive brand image as well. It may also be possible to attract customers from higher-priced competitors.
Where to cut? Here is one example: Are you paying for software subscriptions every month that you never use anymore? This would be a great place to start.
You should start identifying unnecessary costs by determining what is adding value to your products or services. When you figure out what you can't cut, then you can start looking at things that are expendable.
For example, you might want to start using less tape or different packaging to send out your products. You might want to stop paying for a subscription that you no longer or seldom use.
Layoffs are also an option, but they can also hurt your customer service, quality, and morale. Before going there, explore other options because when things turn around, you’ll find replacing workers much more difficult than before.
Consider Outsourcing
If you are considering layoffs, then you might want to explore outsourcing other of your company's core functions. There are a growing number of professionals you can engage so you don’t need to have a full-time person. From call centers to CFOs, you can rent their services and pay for only what you need. This can help your business survive, and you'll reduce your overhead cost.
Fractional workers can give you a cost-effective answer with the added benefit that you'll also get to work with industry experts who will bring new insights into how to do things better. And, you won’t be paying their full salary or benefits.
Conduct Audits
Inflation can eat up any profit that you would've been making, so you might need to do an audit on your business to figure out where you can save money to increase your profits to pre-inflation levels.
An audit will show you which of your business strategies are working and give you visibility into where all of your money is going.
One trap that many business owners fall into is the Sunk Cost Fallacy. This fallacy says that business owners are more likely to keep investing in something that they've already put time and money into, even if it's not a good idea.
However, in many economic theories, future costs are only important if there is a real reason to believe that the investment will pay off in the near term. Stop putting money into something that isn't going to help your company succeed in the future. Admit it didn’t work out as planned, learn from that, save the money and move forward.
When you conduct these audits, you'll be able to uncover opportunities to cut your costs.
Utilize Automation
With employees demanding higher salaries, you may not be able to hire as freely as you have in the past. One solution is to increase your use of automation.
Automation may help you keep up with demand and even grow without needing to hire more people. Reducing work through automation can keep your operations running smoothly and let your current employees focus on other operations that will benefit the business more.
Learn More About How to Deal With Inflation and Other Situations and Help Your Business Succeed
Hiring a business consultant can also be beneficial. These consultants know how to achieve business success in difficult economic conditions and will help you take a fresh look at what your business needs to do to survive inflationary times and/or a recession.
If you're interested in learning more about working with our business consultants, get in touch and let’s see if there is a fit.
It’s as easy as setting up a time for us to talk. Brian Tracy USA: 877.433.6225 Email Me feedback@focalpointcoaching.com
