Find success by pushing yourself to evolve.
While the rate of inflation has gradually decreased in recent months, it’s no secret that it soared to a 40-year high (9.1%) in June 2022. For business owners, inflation makes forecasting expenses and allocating resources challenging, which in turn makes profitability more difficult to sustain.
It’s easy to be in denial about the effect inflation will have on your business. Owners have a tendency to make hasty shifts, like raising prices or cutting costs, that may deliver a short-term remedy – but it’s important to think beyond the bottom line and consider the whole picture.
You may feel justified in raising prices to make up for the increases you’ve incurred due to inflation. You’re paying more for products so you need to pass those extra costs on to the consumer. But not so fast. Take a step back and take a holistic look at your business before you start making moves.
In the midst of inflation, customers won’t be excited to pay more for the same experience or product. Consider the perceived value of your products or services. What could you do to reconfigure or reposition your offering? You may be able to add enough value that your customers accept the price increase.
Take inflation as an opportunity to innovate. Think long-term, rather than reacting with quick fixes that will just keep you afloat for the time being. We shouldn’t expect our businesses to succeed only in times of low inflation. Inflation can act as a nudge to evolve your offering (which should be an exercise you revisit regularly).
It’s important to keep your value proposition at the core of your innovation. Avoid making adjustments that will cause customers to lose interest or value in your brand and offering. Consider complementary products or services as a starting point, but let yourself think outside of the box as you brainstorm different avenues for profitably compensating for inflation.
By diversifying your revenue stream now, you’ll be better prepared for future periods of market instability.
When you consider operational changes you can make during times of inflation, think bigger picture and have a bias for broader improvement. Now’s the time to evaluate technological advances that can automate business functions. Or maybe you can lock in wholesale prices with suppliers by negotiating longer-term contracts.
Regardless of the time- and cost-saving efficiencies you put in place, you should always have an operating reserve that can help you weather an unpredictable market or unforeseen event. If you haven’t socked away some funds for this purpose, start now and make a plan for fully funding it. Financial professionals say three to six months of expenses is ideal.
Remember, no one knows your business better than you. Don’t fall victim to implementing quick fixes in the midst of panic. Strengthening your relationships with customers should be at the heart of any adjustments you make. Monitor how your new processes or offerings are performing and stay informed about what’s happening in your industry.
You may be surprised about the success you’ll see by thinking holistically about the changes you make to your business.
Sources: bluecart.com; asaecenter.org; payhawk.com
