How Small-Business Owners Can Deal with Inflation

Inflation is volatile; the Federal Reserve aims for an inflation rate of 2% annually to strengthen the economy. 

 

However, according to the Bureau of Labor Statistics Consumer Price Index Report, the all-items index increased 8.6 percent over the last 12 months. 

 

This puts inflation at a four-decade HIGH! 

 

While large businesses have enough resources and capital to combat these changes, the U.S. Chamber of Commerce states that 85% of small business owners are concerned about the impact of inflation. 

 

But don’t worry; we will tell you six foolproof ways to deal with inflation as a small business owner. 

 

Here’s how: 

1. Raising Prices of the Products/Services

Whenever the rate of inflation goes up, the Senate Committee on the Budget transfers its burden directly to the consumers by increasing the prices of commodities. 

 

From groceries to fuel, everything experiences an increase in prices.

 

It means that the product’s original price you have to bear as a business owner increases as well. 

 

And it’s only fair if you raise the prices without scaring the customers away. 

 

Although it is not a customer-favorite method to combat inflation, if you do it thoughtfully, both the customer and the business will be satisfied with it. 

 

Here’s how you can strategically increase the prices:

 

1. Consider the cost you paid for the original product before inflation. (Old Purchasing Cost)

2. See the cost you have to bear after inflation. (New Purchasing Cost)

3. Determine the percentage change in the price. 

 

Percentage Increase =     New Purchasing Cost – Old Purchasing Cost Old Purchasing Cost  x 100

 

4. Factor in the increased shipping and overhead costs.

5. Reset your final selling price. 

 

Did You Know?  89% of small-business owners have increased their prices.  (Source: business.org)   And you should do the SAME!

2. Think about Practicing Shrinkflation

With all the supplies and raw materials getting expensive, any small business owner is likely to end up considering:

 

1. Higher product prices

2. Smaller-sized products

 

This option#2 is called shrinkflation – shrinking the packages without dropping the prices.

 

While consumers are wise enough to detect the changes in price, they are not very keen on the changes in gross weight and size of the product. 

 

According to Quartz, these are some of the businesses that shrinkflated their products:

 

• Doritos slimmed down by five chips per bag when the standard size decreased from 9.75 ounces to 9.25 ounces

• Bounty Triples lost three sheets per roll of paper towels when they went from 165 sheets to 147

• Crest 3D White Radiant Mint lost one brushing when a tube dropped from 4.1 ounces to 3.8 ounces

 

So, by reducing the amount of product while retaining its retail price, you can deal with rising costs. 

 

For example, if you run a home-based bakery and it takes 600g of batter to bake six cupcakes (100g of batter for each) on average. 

 

You can now use the same 600g batter for baking eight cupcakes (75g batter each). 

 

It is an EASY way to deal with inflation in your day-to-day business activities. 

3. Start Selling Them Up in Bundles

If you have a stock that moves slowly or some of the products on your store HARDLY get an order; get rid of it as soon as possible!

 

Put them up on offers or start selling them in bundles. 

 

It is beneficial to follow this method since it helps: 

 

• Clear out the old inventory

• Bring cash for your business

• Eliminate the less profitable products from your stock

 

Indeed, a win-win situation! 

4. Re-visit Your Marketing Spend

Research indicates that cutting the marketing budget is the first step small-business owners take due to rising inflation. 

 

This is something you need to do MINDFULLY. 

 

Don’t cut your marketing spend altogether, rather optimize it. Invest in the right channels to stay on top of your customer’s minds. 

 

You can do this by interacting with them on Linkedin and other social platforms.  

 

Also, limit your paid advertising campaigns that are not affordable for you anymore.

 

Another great way to keep the revenue flowing is by asking your existing customers for referrals but this can only work if they are happy with your products & services. 

5. Consider Going Online on a Marketplace  (It’s Low-Cost)

 

While you can’t control the economy, you can surely control how you respond to economic changes. 

 

There’s one thing you should always remember: No business is too small to sell online. 

 

Complementing your physical business with a digital storefront goes beyond saving your time and labor cost.

 

Best of all, it’s a low-cost way to diversify your income stream.

 

So, as a small business owner, you must not overlook the power of marketplaces, especially the ones that serve a dual function — trading & business networking

 

One good example here is SeeBiz, a platform where building an online wholesale store is quick and easy.

 

This means you don’t need to spend thousands of dollars on hiring a developer.

 

So, navigate this inflation storm by showcasing your products to a wider audience.

6. Take out a Small-Business Loan (If Needed)

You can make full use of the SBA (Small Business Authority) loans if the shock from inflation is too much to handle and you don’t want to shut down your business. 

 

These loans are very convenient. 

 

You can gradually repay the loans when your business grows and stabilizes. 

 

There are many loan options, like:

 

• Guaranty Loan Program

• SBAExpress Program

• CAPLines

• MicroLoan Program

• CDC/504 Loan Program,

• HubZone Program

 

You can choose the one that best suits the needs of your business.