Increased costs or inflation may occur when demand exceeds supply in the market. As mentiond by Kavan Choksi Business Consultant, when product prices rise, the purchasing power of consumers can go down, leading to changes in consumer behavior and market dynamics. Small businesses need to be proactive about adapting to these conditions to remain competitive and profitable.
Kavan Choksi Business Consultant marks a few pointers that can help small businesses to stay profitable during inflation
Inflation may occur regardless of the economic conditions. Limiting oil output may hike gas expenses, while supply chain interruptions might cause manufacturing to cease. Moreover, small business owners might even lose money as supplier expenses go up. The situation is made worse by customers who are also dealing with inflation and are late in paying their bills. Cash flow problems, supply chain fears and price increases dominated headlines in 2023. Global average inflation is now about 7%. Even though it is expected to decrease to 5% by 2026, it still means that small businesses need to prioritize their annual bottom line more than ever in any business plan.
Inflation comes with many challenges. A small business has to adapt to these changes in order to survive. Here are a few tips that can help them to stay profitable during inflation:
- Rework the pricing: Rather than increasing prices across the board, investors should analyze supply specific areas and hike prices in its accordance. Inflation can be a tough time for both consumers and business owners. Hence, the consumers are quite likely to understand the need to change prices. The businesses in the food and service industry usually take a harder hit than most during inflation. Owners of such businesses hence especially have to plan properly and determine where they must increase pricing. While it is definitely vital to adapt to the changing financial climate and modify prices as per requirement, business owners must remember that inflation isn’t forever. Keeping flexible pricing in the food and service industry usually does pay off in the long term.
- Reduce fixed costs that are not business critical: Inflation would be a good time to reevaluate the tools, subscriptions, and consumable goods a business spends money on, and subsequently determine if they’re necessary or not. In an inflationary environment, cost management becomes crucial. Small businesses must reduce non business critical fixed expenses to offset the impact of rising prices.
- Invest in automation: Small business owners should leverage technology and automation to improve efficiency and reduce labor costs whenever possible. Many think that automation is only for big businesses, but that is just a misconception. In fact, one of the best ways a small business can cut costs is by embracing automation and reducing human labor. There are many software and tools available today that can help businesses to automate many monotonous tasks, reduce the risk of human errors and streamline operations.
Inflation is tough for all. It can be overwhelming to think about the future in these unpredictable times, especially as a small business owner. As per Kavan Choksi Business Consultant, the best these owners can do is take the necessary steps to be prepared for any difficult situation that may arise.
