One of the inevitable consequences of COVID that many anticipated is the economic damage that would be inflicted on the globe due to supply shock. With an increase of over 8%, Inflation has managed to reach a new peak over the last 4 decades. Aside from homemakers, even small to medium-sized firms face significant challenges. Research shows that many company managers (almost 33%) main concern is the spike in cost. Many company owners have had to devise new ways of escaping inflation’s grip over their business. While there’s no silver-bullet approach for dealing with inflation, there are many proactive measures that can be implemented to minimize its effect.
History has proven that while inflation is inevitable in an overheated economy, it is always temporary and is, infact, a precursor of an economic boom. The only question is, are businesses prepared to navigate through it? Raising prices, compromising quality and cutting-cost is a typical response in most organizations. While they might help, it’s important to ask yourself the following:
- Are your customers upset over the price increase?
- Is it harder for your workers to deliver results?
- Do the above steps hurt your brand?
While inflation is a precarious time for businesses around the world, we always implore companies to respond to it optimistically. With a plan in hand, inflation can turn into an opportunity for SMB’s to grow, mature and improve. IdeasUnlimited is no stranger to inflation and has devised many strategies to mitigate its effects. In this blog, we will be sharing some of what we have learned not just from our experience, but from our clients as well.
Give New Talent a Chance
While enterprises announce massive lay-offs during inflation, we’ve seen the complete opposite happening in some of the smaller companies. SMB’s tend to go on a hiring frenzy during inflation for two main reasons. One, unemployment from the economic downturn places many high caliber and talented workers in the job market that smaller companies can bring onboard. And two, teaming up some of the older workers with new hires brings fresh, out-of-the-box ideas to the table that injects some much needed innovation and creativity into a company.
What’s unique about COVID is how it has elevated work-from-home to a new level. Thanks to the world-wide adoption of remote workforce, it is now easier than ever for companies to find workers from all over the globe to join their ranks. By hiring from other regions, companies can diversify their staff without raising their cost.
Tread Lightly when Increasing Prices
According to a survey, even when faced with a price increase in raw materials, transportation, or equivalent mid-level commodity, SMBs are hesitant to raise their rates promptly. In almost every case, price increase has a direct impact on customer retention so companies must be very careful where they target their price increase. A very simple rule of thumb is this; never change price on your most popular product or service. A great example is Costco’s $1.50 hotdog that has remained the same price for over 30 years. Despite taking loss, Costco knows that the $1.50 hotdog brings in customers that eventually buy their other products.
Your most popular product or service is usually catering to newer customers while your more loyal buyers are purchasing other things. Those are the ones who will usually understand and empathize with your need for price increase.
Cut Cost Smartly
Cost cutting is one of the most common techniques for dealing with inflation and bringing down production expenses. However, it can also backfire if not done properly. Many SMBs don’t take the time to analyze each of their value-adding operations carefully and thus end up cutting costs somewhere that compromise their brand. For example, many IT companies tend to cut costs in customer support during inflation. But reduction in customer satisfaction can be disastrous and could potentially lead to irreparable damage to a brand that has taken years or even decades to build.
IdeasUnlimited has seen the incredible cost-saving advantages of simply shifting to a remote work environment. Not only does your company save money on office space, it also allows workers to be more productive. SMB’s can also look at alternative software solutions to save on license fees and subscription costs.
Keep a Close Eye on your Finances
Normally, accounting analysis is done on a quarterly basis. During inflation, we suggest changing it to monthly. It’s important to constantly watch your finances since one may not fully understand exactly where cost is going up. For example, ecommerce, one of the most popular choices of startups, tends to forget the one thing that jumps in cost the most; delivery. Particular in this inflation we find ourselves in, rising fuel costs have put the burden most on delivery for online stores.
With so many industries and fields, it can be tricky to pinpoint exactly where the cost of operation is rising. As a result, many tend to panic and cut costs everywhere they can. Inflation is the perfect time to slow down and self-evaluate. The best way to do that is by analyzing your financial report more frequently.
Invest in your Future
As we said before, inflation is simply a moment in time. As currency devalues, it gives everyone an opportunity to start investing. As mentioned above, one place where many companies invest is simply in themselves by hiring newer employees. But there’s so much more that can be done.
SMBs diversify and pivot during inflation in order to try new product or service lineups. This particular inflation has opened the door wide open for outsourcing. Because of this, more SMBs are hiring third parties and remote workers for their company. When inflation passes and costs stabilize, one will look back at how they built a strong foundation.
These strategies will assist you in minimizing the negative impact on your business. Switching your onsite business to remote or semi-remote is one of the simplest and most actionable steps that our readers can take. Deploying remote support is fast, cost-effective and carries minimal risk. Get started today with IdeasUnlimited by contacting us for more information on how your business can thrive during inflation. We’ve been in the business for over a decade and offer affordable call center services, healthcare answering services, virtual assistant services, and a variety of other services.