How to fight inflation as a small business owner
Inflation is a threat to every small business, but these tips to save costs and boost sales can help you combat inflation.
With rising costs and interest rates, most small business owners struggle to make ends meet. However, this isn't the time to start worrying about the financial markets or the federal reserve. This is the perfect time to make changes to your services, save money, and build an emergency fund to help you fight inflation.
Of course, there might be a smaller money supply in terms of investments, but there is a way to weather this financial storm. In this article, we'll share tips on how to fight inflation and even achieve your best performance yet.
Tips to combat inflation as a small business owner
1. Monitor cash flow
With rising prices, it's key to stay on top of your business's bookkeeping. You'll want to ensure that your accounts receivable team is receiving payments on time. If they aren't, double down to make sure that no further services are offered to those whose payments are past due.
You'll also want to ensure that you send your invoices promptly as well. Billing clients on a monthly basis can make it easier for clients to make their payments regularly, compared to quarterly or annual payments, which require much higher sums. You might also choose to do credit checks on new clients to prevent issues from arising, such as late payments.
Alternatively, you can require customers to pay upfront when offering your services. If your profit margins allow it, you may want to experiment with invoice discounts to help remove cash flow gaps.
2. Switch to a remote environment
With higher interest rates and increasing rental prices, renting real estate, such as an office, might not be the best investment right now. Some businesses may choose to reduce their debt by selling their real estate for a profit or canceling their rent and switching to a remote environment.
For example, if you own an insurance company, you might meet with clients virtually instead of in person. Higher costs associated with rent can quickly cause businesses to lose their profits while adding to their debt. With increased rates for landlords, it might be trickier to negotiate a lower rental fee. But, you can still try to reach a compromise or find a more cost-effective rental space if a remote environment isn't feasible.
3. Cancel subscriptions
When there's a booming economy, it's easier to spend money. But when inflation is on the rise, it's time to review your budget and check which tools you're paying for that aren't really helping your bottom line. Tools that automate processes to reduce headcount while improving productivity are worthwhile to reduce inflation costs. You might even find that there are many subscriptions your company is paying for that aren't even actively being used.
So, when there's rising inflation, it could be a good time to look over your expenses and start canceling subscriptions that cause you to spend more money than you make. Your aim should be to only pay for tools that boost productivity to help you meet your financial goals.
4. Change your product and services
When you notice a rising interest rate, it's time to rethink your product offering and services. You might expand your service offerings to ensure higher revenues and profits to be better able to control inflation. You might also increase your prices to counter the inflation rate, though this is typically a last resort for most small business owners. Commercial banks often offer different services depending on whether it's a booming economy or a recession to maintain high revenue.
So, as an agency, consulting, or service company, you too can alter your services completely if there's downward pressure on your finances. Think about what services your customers need the most from you.
6. Save money or invest it
We've talked a lot about reducing costs as interest rates rise, but let's think about how to maximize money at this time. As interest rates rise, it's better to be a saver than a spender. As the federal reserve bank increases the federal funds rate, banks will also start to offer higher interest rates. If you move your money into a savings account, you could earn more money from interest.
The best time for a small business owner to save money is during a period with a high-interest rate. So, when the central bank starts to increase rates, it's a good time to be debt-free and earn more income. However, if your personal finance situation is debt-ridden, higher interest rates can be a burden. So, watch your spending during this time and instead focus on investments and saving money when the market is operating during a high inflation period.
7. Increase your prices
When the inflation rate increases, sometimes your only option is to do price increases on the services you offer. Increasing the prices of your services needs to be handled with care as it can result in higher churn rates, increased customer support debt, and negative reviews. You might add upsells to your services, move one of your popular services to a higher-tier plan, and focus on your premium customers.
You can also create custom packages for valuable customers, so they can get a white-glove service while you increase your profits. Attracting more premium customers, such as enterprise businesses instead of everyday consumers can also be a great way to earn more through higher pricing tiers.
8. Streamline your selling process
You’ll sell more if you simplify your sales process. The easier it is for consumers to self-transact on your site without waiting a week for a consultation, the more sales you’ll drive.
Ensure your site has detailed service descriptions, clear pricing, helpful client testimonials, and seamless online checkout. For important workflows, like completing a purchase, submitting a form, or setting up an appointment, reduce any unnecessary fields and remove extra steps. Removing even one form field from a lead form can boost its conversions by up to 26%.
With website workflows that guide toward conversion and make crucial information easily accessible on your site, you cut down on the time you spend upfront qualifying them. When your site answers their questions proactively, you spend fewer hours each week responding to basic questions about what you offer. It leaves you with more time to close important deals that generate revenue for your firm.
B12 is a great tool for improving your online sales process and removing operational inefficiencies. Every step of working with your small business, from initial contact to purchasing online or signing a contract becomes seamless, available on desktop and mobile, and replicable for every lead or client.
For example, with B12, you can set specific next steps for each interaction on your site. If you’ve set up a form submission’s next step to be submitting payment, B12 will carry forward information like name, email, and phone number from the form submission to the payments form. This reduces client frustration and increases the probability that a visitor will complete the required actions.
Take steps to inflation-proof your small business
You can't control inflation, but you can combat it. Ultimately, you'll need to find ways to earn more and spend less as the interest rate increases. You can cut your costs, such as subscription fees, credit card processing fees, and eliminating rentals. You can also boost your income by making changes to your services, increasing your prices, or saving your revenue to earn interest on it.
The rise in prices for goods and services can be a great opportunity for your business to earn more income due to higher interest rates, you just need to make a few tweaks to seize the opportunity of a lifetime.
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