Navigating inflation as a small business owner isn't just your concern—it involves the government. Yet, when it's clear that politicians, whether internationally or not, are losing control, it's time to take charge of your business amid this economic instability. According to recent economic reports, inflation rates have risen by an average of 5.8% globally in the past year.
I haven't been swayed by the social chatter about businesses, even larger ones are folding due to inflation challenges. I've faced setbacks, but I've consistently kept my business afloat. A survey of small business owners revealed that 86% are concerned about the impact of inflation on their profitability.
Recently, I made around $50 in consulting service sales, and the next day it all went into purchasing papers and generator engine oil. You might be wondering how I managed to keep the business going. If you're running a small business like mine, you're likely in a similar predicament and searching for a way out.
Well, let me share how I maintain my target cash flow and generate profits, even when today's earnings could be swallowed up tomorrow. Read to the end of this post to glean some practical experience to help your business navigate the current inflationary challenges.
1. This is No Time To Spend Lavishly
If, like me, your business has been thriving for years, it's easy to get carried away by the reality of present inflation. You may believe things will return to normal, but that's a misconception.
You can't continue spending money the same way you used to. Check where your money is going. Many fall into lifestyle inflation, and as your business is closely tied to you, it's challenging for an average self-employed person to separate personal from business spending. This can quickly eat into your business profits.
Even though saving might not seem optimal now, I've learned to cut down on spending, saving up to invest and increase sales, and profits.
2. This is the Time to Invest
Talking about savings, keeping your money in the bank, and watching its value erode isn't wise. The purchasing power is consistently decreasing, so why not invest?
In my case, I invest not in stocks or real estate, though those are excellent options I'm considering. I retain my money's value by buying items for resale. The rapid increase in prices of laptops, office appliances, and phones has been profitable. A laptop I bought for $150 a few months ago now sells for about $250. Since sales of computers, phones, and accessories are part of Techie BEC Konsult's business, it's more lucrative than saving in one bank.
In short, reinvest your money in your business and consider external investments like stocks and real estate. The focus is on finding ways to retain the value of your money, even if there are no external touches for improvement.
3. This is the Time to Tweak Those Prices
Let's talk about adjusting prices. With inflation doing its thing, sticking to the old pricing slate could be a one-way ticket to a financial headache city for your business. According to a recent report, small businesses experienced a 20% increase in operational costs due to inflation. As a counter to inflation, as many as 89% of small businesses increased prices.
As a small business owner, you can't afford to turn a blind eye to the impact of inflation on your costs. Take a moment to dig into your expenses – raw materials and operational stuff. The prices are playing a different game now, your pricing strategy needs to catch up. The consumer price index was expected to increase 0.4% in January from a month ago and 6.2% on an annual basis, according to Dow Jones.
But hold up, this isn't a solo mission. Let your customers in on the plan. Be straight with them about why the prices are getting a makeover. Honesty goes a long way, and your customers will appreciate you leveling with them. Get creative with your pricing. Think tiers or value-added bundles. This gives your customers options and keeps those revenue streams flowing.
Going a bit up with prices can be pretty confusing in this sense. Don't panic! What are your rivals up to? What are customers saying? Stay nimble and tweak as needed. This isn't a one-and-done deal; it's an ongoing conversation between your prices and the market.
4. This is No Time to Make Money from One Source
Multiple streams of income, especially now, make sense. If you haven't explored this before, the current inflationary reality is a good reason to reconsider.
I initially operated with a three-in-one business concept, representing Business, Education, and Computer consulting at Techie BEC Konsult. However, in the current reality, diversifying income streams has been a lifeline for my business. If your business is still a one-eyed master, it's time to introduce new or related ideas to boost not only sales but also income.
Having money coming in from three or more lines of services or products helps mitigate the impact of inflation. You don't necessarily need a new business; repurpose your existing one to generate income from neglected areas.
5. This is the Time To Outsource
In 2020, I bought an HP OfficeJet printer for $35.53 (N13,500). To replace it in 2023, I spent $162.50 (N61,750). What an inflationary jump! If you haven't embraced outsourcing, now is the time to consider it.
First, look for out-of-office services at more affordable prices. Before the ordered printer was delivered, we collaborated with local printers. We sent our finished works to them for printing at cheaper rates. Until you outsource, you might not realize you've been overspending when things are tough in-house. According to Deloitte, outsourcing services have resulted in a 30-60% reduction in operational costs for small businesses facing inflationary challenges.
6. Time To Take Extra Good Care
Our $35.53 printer had been serving us well, but we never bothered to know its latest price. When it broke down, and we needed to replace it, we felt the impact of inflation. This renewed the valuable lesson: "Take good care of your machines."
To retain savings and reinvest in your business, minimize unnecessary expenses. One significant area is the replacement and repairs of machines and appliances. Reducing spending here involves maintaining existing equipment well, making them last longer for better profits.
Put extra effort into maintaining everything your business depends on, such as printers, office appliances, tables, chairs, and generating sets. This requires physical effort but saves money in the long run.
7. This is the Time to Collaborate
Government policies can be frustrating, and recent introductions have hit businesses hard. While I used to prefer doing things my way, collaboration has become crucial in this inflationary environment.
For various online registrations like NECO, WAEC, JAMB, and NYSC, individual cameras, and biometric gadgets are required. To avoid excessive spending, collaborating with others in the same field is beneficial. We share resources to minimize costs and avoid unnecessary competition during tough sales periods.
Conclusion
Every business is unique, and your approach may differ. However, in responding to inflation and economic instability, adaptive strategies can make a significant difference. You might not need all these strategies, so consider what works best for your business.
These statistics highlight the tangible impact of adaptive strategies in the current economic climate and underscore the importance of taking proactive measures to thrive amid inflationary challenges.
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