If inflation has you worried, you’re not alone. In June 2022, inflation hit a 41-year-high, peaking at 9.1%. The cost of items most companies need to operate daily, from fuel to food, shot up. On top of rising prices, the cost of borrowing money has gone up, due to an increase in interest rates. As if that weren’t enough, the Great Resignation has led many companies to offer employees higher wages and better benefits, in an effort to stay competitive and minimize labor shortages.
While inflation might have already hit its peak, higher prices are here to stay for the time being. Fortunately, there are things you can do to keep your company afloat and fight back against inflation.
With prices skyrocketing, cutting expenses might seem like it’s easier said than done. But lowering your costs is possible. You can take several approaches to cost-cutting. One option is to talk to your suppliers and see if they can offer you volume discounts. You’ll pay more upfront but will also end up with more of the supplies you need. Having stockpiles of supplies can help you weather any supply chain issues that come up, too.
Another option is to make cuts where you can. If your employees primarily work from home, you might be able to eliminate some office-related expenses, such as rent and the cost of furniture and supplies.
Carefully take stock of the supplies your company purchases and uses. Are there less expensive options available? It could also be the case that you’re buying items that don’t get the most use. Eliminate anything you don’t use or need.
The more your company produces, the more it can sell, and the higher its profits. Find ways to increase production without increasing costs. One option is to cut back on activities that don’t directly improve productivity. For example, meetings usually take up employees’ time without providing many benefits. In many cases, the topics covered in a face-to-face meeting or videoconference can easily be listed in an email.
Gamifying productivity can help improve. Encourage employees to use tracking software that keeps tabs on how quickly they work. When employees have a goal to meet, they’ll often work harder to achieve it. Just be sure to tread carefully with this one, as you don’t want your team to feel they are being monitored or that you don’t trust them to do their jobs.
Make Strategic Price Increases
Increasing prices helps you counteract increased expenses and supply costs. But it can also alienate your customers or make it harder to find new customers. You need to be strategic when raising prices.
For example, try to raise the price of your most popular, best-selling product or service, but keep the prices of less in-demand items the same.
You can also try offering bundled services, to get customers to buy more. Instead of purchasing one product for $60, they can buy two for $100. They save money, but your company still comes out ahead, as you’ve nearly doubled your sales.
Many tasks that once had to be performed manually can now be automated. Automation saves time and money and can help your company thrive without a smaller team. Some tasks to automate include invoicing, paying bills, scheduling, and order taking.
Expand Your Market
Focusing on growth can help your company cope with inflation. Expanding your market share means you earn more customers, which leads to greater revenue. In some cases, customers might seek your company out, especially if they perceive you to be a lower-cost option to the services or products they previously purchased. In other cases, you might have to seek out the customers yourself.
Consider Other Financing Sources
Higher interest rates can mean that debt financing is out of reach for the moment. But if you need to raise capital, loans aren’t your only option. Now can be the time to explore other options, such as working with investors or peer-to-peer lending.
Inflation is proving to be challenging for companies large and small. If you need help battling rising costs, the virtual CFOs at New Direction Capital can help guide you. Contact us today to learn more about what you can do to beat inflation.