Cost of living in the U.S. has seen its highest 12 month increase since 1982. Unsurprisingly, inflation is having a significant impact on small businesses.
According to a CNBC poll, 47% of small businesses had to raise their prices last quarter. Another 32% expect to do so if the trend continues. An alarming 26% of small businesses cited inflation as their primary business concern.
Of course, there’s nothing a business owner can do about the macroeconomic factors at work.
So let’s talk about what business owners can do to steady the ship. Here are four ideas that can help your small business deal with inflation.
Use Incentivized Spending
Some businesses will explore financing options to weather the storm. As the Federal Reserve begins to raise interest rates for the first time in three years, consider a manageable option—a credit card with incentivized spending.
One of your goals is to offset rising interest rates, and cash back rewards are an easy way to do so. If your business relies on employee travel, switch to a card with travel rewards. If you can maintain zero balance with an incentivized credit card, you’re scoring three quick wins: cash back, interest-free, and a cash influx at a critical juncture.
Prepare for Higher Interest Rates
Unfortunately, interest rates are going to increase. While you can’t change it, you can get scrappy to offset it. Incentivized spending is an easy start, but it takes more than that.
Now might be a great time to refinance debt. If you are carrying debt with variable interest rates, consider refinancing to a fixed rate to limit your exposure. Lean on your network to help you find financial guidance you can trust. Leverage organizations like SCORE to see what other small business owners are doing.
If you know you’ll need financing over the course of the next year, get ahead of it now, because it’s about to become more costly.
@runviably Is your #smallbizoftiktok thinking about #raisingprices due to #inflationrates? Make sure you consider the #customerexperience ♬ original sound – Viably
Finance Your Invoices for a Competitive Advantage
Inflation will likely cause cash flow issues across the board, which can put your business on the wrong end of a chain reaction.
If you rely heavily on customer invoices, you might find yourself waiting longer than usual to realize those payments. As a general best practice, take stock of your income management processes, and see where you can streamline. This year will be a critical time to invoice properly and leverage technology in your collections process.
Finally, turn your reliance on customer invoices into an advantage by financing them. While competitors are stuck in the mud with past due invoices, turn yours into a cash influx. It might be just the right option to pay down expensive debt. Better yet, you might use the money to grow or expand your business while the competition is stagnant. Best of all, you can seize an opportunity without incurring high-interest debt.
Raise Your Prices with Inflation, Tactfully
As the aforementioned poll indicated, nearly 80% of U.S. businesses have either raised their prices or plan to raise their prices. While no one looks forward to breaking that news to customers, there are a few ways to prioritize their experience.
First, communicate clearly. For small businesses especially, your customers will likely relate to your team on a personal level, and they will understand if you explain the circumstances that are causing the price increase. Use a formal announcement in your store, on your website, or on your Facebook page. It can say something like, “We take pride in our low prices and have maintained them for three years, but as our costs have increased across the board…”
Second, reframe it as a showcase of how much you value their business. One way to accomplish this is to give them the date your prices will change. This way, they have time to purchase at the current price. You could even brand it as a “last chance sale” to encourage customers to take action. It may seem like semantics, but your message is that you realize the impact on your customer, and you’re doing everything you can to ease their burden.
Your goal is to maintain their loyalty, and showing them that you care will go a long way.
For more tips on business finance and operations, check out the rest of the Viably blog.