Throughout the pandemic, small business owners have contended with Covid-19 restrictions, but another issue is starting to take precedence: inflationary pressure. Across the U.S., small business owners are suffering under the weight of inflation, and the heaviness is unlikely to decrease anytime soon.
According to Bankrate, 53% of experts believe inflation will be more significant in the next 12 to 18 months than previously experienced. This problem is on top of the other issues that entrepreneurs and business owners are currently facing, including labor shortages and supply chain issues.
When Veem, an online payment platform, conducted a survey to see how small business owners felt about the increase in inflation as their other challenges surrounded them, they weren’t optimistic about their circumstances or future. The survey found the following insights:
- Around 40% of small business owners report feeling inflationary pressure around their cost of supplies.
- 1 in 5 small business owners has thought about getting a loan to help with cash flow and combat inflation.
- 51.5% of small business owners do not believe inflationary pressure will be resolved by 2022.
With inflation lingering, most businesses are starting to look for ways to relieve the stress. Usually, their first solution is to increase the costs of goods, a method most consumers grumble about but still tolerate. However, for small businesses that target underserved communities, raising prices is not an option.
Why price increases can’t be the first step
Briana Thompson is the owner of Spiked Spin, a boutique spin studio in Brooklyn, New York. In an interview with CNBC, Thompson explained that she’d just opened her company’s doors when the pandemic swept over the U.S., causing her business to shut down.
Thankfully, at the beginning of 2022, Thompson reopened her studio after leaning on her personal emergency fund and draining her savings. And she’s more determined than ever to help underserved communities experience the best health and wellness possible.
Still, despite her commitment, Thompson is affected by inflation. She’s seen other businesses increase their prices because of inflationary pressure, but she knows that route isn’t a possibility for her.
Thompson wants to keep her studio affordable and accessible to her community, so raising prices isn’t an option. It’d only defeat the purpose of targeting underserved demographics, and her dedication to maintaining affordability might be something you resonate with.
If your target audience is an underserved group, you may be hesitant to increase your prices, despite mounting inflationary pressure. However, you still have to keep your doors open. You have to keep your company afloat if you want your brand to stick around for the long haul. Luckily, there are ways to do that without increasing your prices.
How to survive inflationary pressure without raising prices
When inflation hits and you can’t increase your prices, you have to look at other ways to keep your doors open and your business alive. Fortunately, there are five tried and true methods you can use.
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Automate your processes
One of the best ways to save money is to automate your processes. This tactic will work wonders in increasing your productivity. In fact, one company nearly doubled its productivity after reorganizing its warehouse and adopting automation.
Even better, this strategy helps fill in the gaps when it’s difficult to attract top talent during the Great Resignation. If you can’t find qualified employees, you can always automate specific processes to get necessary tasks done while saving financially.
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Cut expenses when possible
Budget cuts are never easy, but if you see areas where you can decrease spending, make sure you make the cuts. Perhaps that means downsizing your office or transitioning to a hybrid or remote workforce. Or, maybe that means letting go of certain services or products that your company doesn’t need to function. Regardless of what it is, find ways to cut expenses to keep money in your business.
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Go after new customers
Whenever there’s inflation, you’re going to see new customer segments. Consumers get nervous when inflationary pressure increases. They don’t want their favorite brands to raise prices, but when companies take that step, consumers are quick to look elsewhere for similar products or services.
Your brand can become extremely attractive if you maintain reasonable rates, so don’t hesitate to look for new potential customers. Market to different segments and get the attention of those who want great products or services at a cost-effective price. By doing so, you can expand your customer base to bring in more cash flow.
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Increase employee engagement and productivity
Your employees are crucial to growing your profit margins, but you’ll need to increase their engagement and productivity if you want to maintain a successful business. However, this task isn’t easy.
Engaging your employees requires you to get to know them better, provide room for growth, support them in their work, and give them tools for success whenever possible. When your employees know that you’re investing in them and their careers, they’ll be more connected to your mission and work harder as a result.
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Revisit your profit margins
It’s important to know where your company stands financially. Only with knowledge can you determine the best next steps for your business, which is why you must analyze your profit margins. Look at your costs and examine what your margins are like in the current economy. Then, brainstorm ways to increase your profit margins without sacrificing the quality of your product or service.
You don’t have to stop helping underserved communities
Just because inflationary pressure is heavy doesn’t mean your business can’t keep helping underserved communities. There are ways to withstand inflation without making your products or services inaccessible to your target audience. And if you use the strategies in this article, your customers will be grateful for it and loyal to your band long-term.