Image by Gerd Altmann from Pixabay
By Michelle van Schouwen
It has been a while since small business owners faced the challenges of inflation, but many economists are predicting that significant inflation will continue for at least the first couple of quarters of 2022, maybe longer. Small business owners must plan for the here-and-now of increasing prices and demands for higher wages.
-If you have an adjustable-rate loan, consider converting it to a fixed rate option now, if you can get a competitive interest rate. We’re in an increasing rate environment for the foreseeable future.
-Lock down your fixed expenses at current prices if you can, with year-long contracts or attractive leases. Talk to your biggest vendors first. Assume that the cost of pretty much everything is going up.
-Raise your prices as needed. Don’t simply increase them by the overall inflation rate, though. Not everything in the U.S. market basket will be going up at the same rate. Carefully analyze your market, expenses, and competitive pressures. Generally, it’s better to raise prices a little bit every year rather than a lot in any one year.
-Consider tiered prices for different products or services, competitive short-term deals for customers who commit to ongoing purchases, and other tactics to keep cash rolling in and to retain your customer base. Do not lock yourself into selling goods and services at lower-than-desirable prices for longer-than-desirable periods of time.
-Accompany any price changes with powerful messaging that reinforces the value of your offerings and your success in providing customers with what they want and need at a fair price. Marketing is extremely important during any period of instability – and inflation counts as instability .
-Increase employees’ pay, especially for the people you would be hard-pressed to do without. See what comparable employers in your region and industry are paying, and make sure you are at least holding your own. At the same time, let go of any employees whose performance is marginal, leaving you better equipped to compensate and retain the best.
-Make pressing capital or inventory purchases as soon as you secure a good price.
-On the other hand, cut any frivolous or outdated expenses. Do a comprehensive audit of your monthly cash flow, and cut or reduce any offending costs.
-Automate. You can save a good deal of money by systematizing and automating a number of tasks.
-Continue to look forward. Inflation may last a couple of quarters – or another year or more. Economists are still debating this. Make sure your business is healthy in either scenario.
-Finally, keep up with Main Street and Wall Street market reports. We’re living in a fast-paced economy, with a range of unique factors from supply chain issues to COVID outbreaks to employees working remotely, all of which impact your business. Being in the know about the economy outside your own immediate concerns puts you in a better position to navigate opportunity and risk.
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Michelle van Schouwen is principal of Q5 Analytics, providing advocacy and communications for climate change mitigation and adaptation. See Q5 Analytics.org. For 32 years, Michelle was president of van Schouwen Associates, LLC (vSA), a B2B marketing company. In 2017, van Schouwen Associates was acquired by Six-Point Creative Works, Inc. of Springfield, MA. Michelle is available for speaking engagements on topics including her work on climate crisis mitigation and Florida coastal water issues. She speaks to business and student groups about marketing launches and entrepreneurship and works with start-ups to support their development.
