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5 Ways Small Businesses Can Better Prepare for Inflation

Sagely is an advisory platform connecting small business owners to experts in various industries and fields of expertise. Our Sages (aka advisors) help small businesses navigate the everyday ins and outs of starting, running or growing a business. Our customers range from one-person startups and budding entrepreneurs to established small businesses.

One of our own Sages, Joel Chrisco, the Director of Financial Planning & Analysis at International Rescue Committee, shares five tips small businesses can consider to address inflation. Joel has an extensive background helping and advising small businesses on a broad range of financial topics.

Due to current economic conditions, inflation is top of mind for businesses of all sizes. Accordingly to a recent survey by QuickBooks almost all small businesses (99%) are concerned about inflation.

  • U.S. inflation is the highest it’s been in 40 years

  • Small businesses are being squeezed through higher cost of inputs and raw materials

  • Inflation will vary across industries and businesses

Tip #1 - Consider your customers’ willingness to pay if you increase prices.

Every industry is different, but consider whether your customers, be they wholesalers or consumers, would be willing to pay more for your product or service. Look at what your competitors are doing. If they have raised prices, that is generally an indication you may be able to do so as well. Consider which of your customers have the highest willingness to pay and increase their prices first.

If concerned about losing existing customers, consider keeping prices as is for existing customers and increasing prices for new customers.

Tip #2 - Narrow your product and service line.

Now is a good time to simplify your supply chain as much as possible. Consider eliminating slower selling, lower margin products. Promotions can help move high inventory items. You could also try bundling a low margin item with a high margin item. Focus on your best sellers and figure out how you can improve margins or add complementary products around your best sellers.

Schedule a session with one of our Sages to review your product/service lines and determine the right inflation strategy for your business.

Tip #3 - Balance supplier power.

This one may not be as obvious but, depending on your industry, you may have more power over suppliers than you think. If you operate in an industry where your raw materials and inputs are essentially a commodity (e.g., raw sugar), consider getting updated quotes from a few other suppliers and compare costs.

Nearly every business is experiencing inflation, so don't be shy about asking for reduced prices. The worst thing your vendor could say is no. We've done it here at Sagely, and have heard many success stories as well. In many cases, it's easier and more cost effective to retain a customer than to acquire a new one.

Tip #4 - Order in bulk for better prices.

This may be tricky if you don’t have the capital easily accessible, but if you are able to purchase raw inputs and materials in bulk you will likely be able to get a better price. This may increase your warehouse and storage costs, so you’ll want to run the numbers before deciding to go ahead. If you’re selling a product, you could also consider buying a high quantity of high selling products and lock in better pricing.

Tip #5 - Enter into a longer-term fixed-price contracts.

Suppliers may not always be willing to cooperate, but you may want to think about expanding beyond one-time orders to develop longer term contractual relationships to lock in prices.


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The views, information or opinions expressed are those of the writer and do not represent or reflect the views of Sagely. The primary purpose of this blog is to educate and inform; and does not constitute financial or other professional advice or services.

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