9 Strategies to Help Your Company Survive InflationNatalia Persin
Inflation is tough for everyone, employees, consumers, and employers alike. For small business owners and freelancers, the difficulties that come with inflation can be especially difficult.
Don’t panic, however, because there are several strategies you can implement to help your company survive this difficult time.
Read on to learn more about the effects of inflation on your business as well as strategies you can implement to help your company survive it.
How Does Inflation Affect Businesses?
Inflation is the rising cost of goods and services which causes the value of a government-issued currency to fall. Inflation is almost 100% controlled by the government, as they are the ones that control the money supply, and there is little the average citizen can do to combat it.
Unfortunately, inflation has a direct effect on businesses who suddenly find that they must pay more for raw goods and supplies for making their products. Then, in turn, they must charge more for the products in order to maintain the same margin.
The problem is because the prices of goods are rising, employees are also going to want raises that match inflation in order to continue their lifestyles. This can lead to margins being lowered even further, or employees may leave to seek other employment that pays them more. Many businesses also lose buyers who can’t afford the new higher prices.
As you can imagine, small business owners, which already have very thin margins, may suddenly find that there is no profit or that their own income is drastically lowered. Which eventually can lead to the small business going out of business.
Can a Small Business Survive Inflation?
Any business that prepares properly for a recession can survive one. But preparing for a recession can only be done before one arrives, meaning that many companies don’t have the foresight to do so.
Even without preparing in advance, there are ways a business can work to survive inflation. These methods typically require a quick response once the recession begins because once a business starts to go under, it is a difficult slope to recover from.
8 Strategies to Help Your Company Survive Inflation
1. Look to Increase Productivity
There’s no way around it, products are going to cost more during inflation, as are your employees. So it’s time to address the only thing you can control, which is the productivity of your employees.
This specific strategy involves a small amount of trial and error. You won’t always know what truly improves productivity until you implement it.
In order to waste as little time and assets as possible, you should look to other industries to see how they are increasing productivity and see if their methods can also apply to your industry. Some common ways of increasing productivity include rearranging the office, warehouse, or even simply purchasing new equipment that works with more speed.
For example, a customer service representative may be currently seated across the office from the printer. Every time she takes a call and has to file an order, she needs to walk to the printer.
Along the way, she may chat with coworkers or be distracted by the vending machine. Improving productivity could mean moving the printer right next to her desk, so she doesn’t have to get up each time. If you have multiple employees using this printer, it may be worthwhile to purchase a second one just to keep the representative at her desk for a larger portion of the day.
You can also invest in productivity tracking apps, as these can help you judge how productive your employees are as well as see the changes from your productivity-increasing methods. Additionally, employees can get an idea of their own productivity and may feel encouraged to change it.
No one wants to hear the news that their job has been automated, but sadly, automation is one of the main ways to survive inflation.
Take a look at all the positions you are paying to fill. Is there a file clerk that can perhaps be replaced by automation? Or maybe a secretary you can replace with a phone voicemail tree?
Either way, try to find ways to eliminate employees. While the upfront cost might be high to install the software, over time, items like these tend to pay for themselves as you save a salary, medical benefits, and space in your office building.
3. Cut Office Expenses
Office expenses are some of the largest ones companies face, and they are some of the easiest to downsize. First and foremost, you should look at a smaller office.
One of the biggest hiring trends is hiring employees who work remotely. This allows you to not have an office space for them, meaning you can choose a much smaller office than in years past. Perhaps even just a small space for yourself with a conference room for occasional meetings.
But even if your company can’t hire full remote workers, consider hybrid workers, as in those who only come in a couple of days a week on alternating schedules. This can be great for employees that work in design or product management, who you need to see frequently, but putting them on opposite days can allow them to share a desk.
Desk sharing means you will need fewer desks and can downsize to a smaller place. Also, consider going digital where you can. Ask employees to email you things rather than print out each page. This will save on paper and printer ink costs.
Don’t forget to take a look at any subscriptions your company uses, such as one for paper delivered regularly or a firewall service where you pay by the computer. As you downsize, you will need to lower your frequency to these services or maybe stop them altogether.
4. Stock Up Early
If you catch inflation early on when your company still has spare cash reserves, it can be beneficial to stock up on supplies early, before the prices rise even more.
Obviously, you don’t want to stock up to an amount that is more than you can store, but if your company goes through a lot of raw materials, such as wood or cardboard boxes, you may want to grab a few extra orders of those now.
Plus, if you’ve rearranged your office or warehouse to increase productivity, you might find that you have some extra spaces to fill with products that you will use later down the line. Just be careful that you don’t stock up too much, and save a small amount of those cash reserves for problems that may be coming down the road.
5. Raise Prices Slowly
Alright, it’s time to face the facts, during a period of inflation, you will need to increase your prices. Just be sure you do so slowly to avoid shocking and scaring away your customers.
As soon as you think inflation may be coming, and before it begins to hit your suppliers, start raising the price a few cents. While this seems preemptive, if you are wrong and inflation doesn’t hit your suppliers, you can always offer a discount later.
Raising prices slowly and in advance allows consumers to slowly get used to the new prices of the products they are used to buying. And if you do end up losing some customers from the small increase, you will lose them way before your cash flow becomes a serious problem.
You could also consider switching your sales style from a regular purchase model to a subscription model but give customers a chance to skip months. This will guarantee that customers will stay with you but also shows that you understand that there may be a few hard months ahead.
Even if a big client skips a month or two, their continued business a few months down the line will be much more valuable than trying to replace them.
6. Offer New Customer Promotions
If your business is struggling financially, this may seem like a weird solution, but in an inflationary world, you won’t be the only company raising your prices. And if you’ve raised them slowly, you will stand out in comparison to companies who are sending their customers sudden price hikes.
Sudden price hikes can cost a company business, but if your product is a necessity, these people leaving other companies will be looking for a replacement, which is where you come in.
Remember, inflationary periods aren’t forever, but they can last a long time. Even offering a new customer a 6-month discount can go a long way to winning business, and it will show the potential customer you care about their financial situation now, even if you charge them regular prices later on.
7. Eliminate Positions
Just like with automation, no one likes to eliminate employees, but unfortunately, during a period of inflation, it is necessary. Take a look at your company and see if there are employees who can do double duty.
For example, if you have a customer service representative, a secretary, and a social media marketer, chances are you only need a little automation and two of these employees. Eliminate the secretary and ask the customer service representative to direct calls that aren’t directed by the call tree.
Of course, you can’t just add work without offering a pay raise, but this is the point, as your employees will be asking for pay raises during an inflationary period anyway. Offer your customer service representative (or social media marketer) an increased salary for the occasional directing of calls.
Because you are eliminating an entire role, this will still be the cheaper option even if you offer the employee taking on more work a significant raise.
Don’t forget that you can also outsource. Instead of having an in-house hiring manager, consider hiring a service that finds and vets potential employees for you.
While you will still have the final decision when it comes to hiring, this keeps you from having to pay a full salary to someone you can just pay a flat fee to each time they find you an employee.
8. Conserve Funds
With all of these strategies, you may find yourself with extra cash on hand. While it may be tempting to spend it, during inflation, you want to keep as much extra cash on hand as possible.
This way, if one of the aforementioned methods fails, you will have enough money to get your business through a difficult period. When in doubt, remember that more saving is always better.
How Long Do Inflationary Periods Last?
By the time you are a few months into a recession, you’ve probably made some difficult decisions in regards to inflation and your business. But how long will this period last?
Unfortunately, there is no way to know when inflation will end, which is why you should continue implementing the above strategies as often as possible. You never know when a form of automation that wasn’t available to you at the beginning of inflation will suddenly become available.
Regardless of the state of the economy, the above-mentioned strategies are always a good idea to implement in your business because having extra cash on hand and saving money is always a good idea, especially for smaller companies.
So if an employee comes to you wanting to suggest a new equipment purchase, take a few minutes to decide if you need the product now. If you don’t, and it is especially expensive, it may be better to hold off with this large purchase until later, when hopefully the worst of the recession has passed.
Ready to Survive Inflation?
Inflation is a tough period of time for any business, but now you’ve got some strategies to help you survive this difficult period. Don’t wait when it comes to applying these strategies to your business, as you never know how long inflation will last before it comes to an end.
For those specifically struggling with the sales cycle of selling products, check out our article designed to help creatives understand the sales cycle.