Whether you like it or not, you’ve most likely found yourself in a fight against inflation. Somebody hikes prices on your supplier and suddenly your supplier has no choice but to increase the price on you. Then you have no choice but to raise the price on your customer – who (even if they don’t tell you) notices … you can depend on that.
Inflation is like that dung they say always rolls downhill — except the prices you pay go in the other direction. You don’t like charging your valued Hampton Roads customers more… but what other choice do you have?
Maybe you can’t break this cycle yourself, but you can soften the blow.
And I have ideas for you today.
But before I get there, let’s make SURE that your books are in order and that you are making wise year-end choices — i.e. accelerating or decelerating revenue and costs (dependent upon your tax situation) and more.
If you want to get ahead of that stuff before it’s too late, find us here: 757-857-1880
And once you’ve done so, come right back here so we can talk about pushing against the inflationary tidal wave.
How Your Hampton Roads Business Can Fight Inflation
“It’s not what you pay a man but what he costs you that counts.” – Will Rogers
As you know if you’ve had to shell out for nearly anything lately, inflation is on the rise. Of course, broadly speaking, inflation is simply costs going up. And this can be driven by a number of dynamics, but one of the most common is supply and demand. Well, we still have enough demand to go around — but in many areas, not enough supply…
And so we have inflation occurring – more than 6% year over year. The U.S. Bureau of Labor Statistics says that inflation accelerated last March through September worse than any time in 2020. And it’s the worst year-over-year inflation rate in 30 years.
Let’s hope inflation doesn’t go much higher. We can hope, can’t we?
Still, there’s no way this doesn’t sting small businesses like yours. According to a recent survey, more than four out of five small businesses have had to increase prices – and a good chunk of their customer base is complaining even as profit margins shrink for almost half the companies responding.
Not good at all – and not getting better any time soon, at least as far as anybody can predict. So what can you do?
Your best (and quickest) moves
One common-sense response to inflation: Save money where you can.
Fight Inflation Move #1 – Reduce inventory: What you sell is more than the lifeblood of your Hampton Roads business – it’s probably also one of your biggest expenses. Yet think about it. Chances are good that a lot of your revenue comes from a relatively few number of items in your inventory.
Try classifying your inventory into three groups based on their value to your business. The “A” group includes your biggest moneymakers, the “B” group is somewhere in the middle, and “C” items make you the least.
Once you’ve figured this out, closely watch the supply chain, especially on your A items. If your suppliers are getting prone to longer or fluctuating lead times, stock up on their items when you can. And if you’re finding a lot of items in your “C” group, maybe consider ditching a few of them.
Fight Inflation Move #2 – Improve your expense tracking: This not only helps you see where your money goes, but it also keeps you out of trouble with the IRS and makes sure you take every tax deduction you’ve got coming.
Check with us if you’d like specific opinions on expense-tracking software, but generally, the price of this software will depend on the size of your company.
Whatever you pick, scanning receipts is bound to be better than rooting through your shoebox – and it’ll make a big difference in your annual costs.
Fight Inflation Move #3 – Fine-tune your marketing: It’s probably the worst move in the business book to give up trying to acquire new customers when times get tough – thinking like that just makes a tailspin spin out faster. Still, I bet your marketing has a lot of parts that could do with some tinkering. Too often in small businesses, marketing is launch-and-forget.
Make the time to take a hard look at your advertisements, for example. Which ones pull in the customers? Which ones don’t? Work on (or just drop) the clunkers. After all, you’re paying good money for those.
And remember: Keeping customers you already have is always cheaper than advertising to bring in new ones. Customer loyalty also becomes even more important during inflation.
Fight Inflation Move #4 – Move to a cheaper workspace: The past couple of years have been a gut reno for the work world. For a lot of workers, the office is now their dining room table. Will this continue?
Who knows … but do you really need to keep shelling out for all those square feet of office space? Don’t forget the price tag of furniture, utilities, and those mountains of Keurig cups.
Cheaper alternatives can include co-working spaces, either for-hire or through a partnership with another local Hampton Roads business. Ask around.
Inflation sure isn’t fun, but it won’t last forever (it never has). We’re in this with you and your business, and if we can help at all, please reach out. Stay safe.
To a happy and prosperous year-end…
Virginia Accounting Services