WHY STAGFLATION WILL KILL YOUR BUSINESS IF YOU DON’T ACT NOW

“Are things getting more expensive?” – the sentiment shared by almost everyone, from business owners or collared workers.

Things are indeed getting more expensive in Singapore and stagflation is real. Even the nation’s Senior Minister, Tharman Shanmugaratnam, highlighted in the recent Investment Management Association of Singapore (IMAS)-Bloomberg Investment Conference.

What is Stagflation?

Stagflation is when the economy stagnates while having to deal with high inflation. ?

It’s like a snowball effect with each impacted source trinkling down to the next potential victim. In this case, stagflation affects the overall economy, then dragging down businesses, and ultimately the people in the society.

FUN FACT: Did you know the last stagflation happened in 1970s? During that time, the standard of living in Singapore dropped drastically with the Monetary Association of Singapore having to stepped in to mitigate the situation.

Should Businesses Be Worried About Stagflation?

Stagflation doesn’t close any doors, it opens doors to challenges instead.

The rise of stagflation means that businesses will feel the pinch of their everyday operations – from skyrocketing electricity bills to manpower crunch. As employees are expecting more remuneration to cope with the higher standard of living, they see this an as opportunity to look for higher paying jobs to sustain their lifestyles.

Even if they don’t, there’s always this seed in their head to be their own boss and start a business. The rise of home-based businesses in Singapore means people are looking at alternative sources of income, putting their ‘Asian’ career on the sidelines.

What Can Businesses Do During Stagflation?

It’s times like this when businesses and communities should come together to support each other. With the rising costs of operating a business, owners should pool resources and operate smart to reduce overheads and fixed costs.

Here are some actionable next steps that we think businesses should adopt:

1.?????Outsource business functions

While this makes most sense, there has always been quite a strong resistance from small business owners to outsource certain functions. The reason is simple – they do not want to lose control of their business.

We think it’s quite the opposite. By outsourcing certain operational functions such as accounting, bookkeeping, or even marketing, you can spend more time really digging into your business to identify gaps for improvement.

Outsourcing such functions makes a lot of sense – it is mostly paid on a pay-per-use model where you only pay when you need the service. So stop paying for unnecessary hours or services that you don’t need!

2.?????Open doors for shared services

It’s common nowadays for businesses to tap on shared services. Payroll functions now centralised for maximum cost efficiency. By sharing the costs with multiple businesses, the cost per entity will be much lower.

3.?????Embrace the circular economy

There has been quite a lot of chatter about the circular economy, and mostly for environmental reasons. We think that the circular economy is a great way to reduce additional expenses while giving items a second life.

For instance, in the F&B industry, if there are lots of leftover food, the option is either to throw them or give them away.

But with the concept of the circular economy, these leftovers can be sold to manufacturers where they can transform trash to treasure.

The result of that? Cheaper cost of production. With cheaper cost of production, the retail selling price would generally be lower.

Here’s a great example: https://ellenmacarthurfoundation.org/circular-examples/de-clique

4.?????Tap on Singapore government grants

Fortunately, the Singapore government has tons of grants available for SMEs to apply for. One example is the recent MRA grant, created to support SMEs in Singapore to expand their market with up to 70% of the eligible cost covered, capped at a maximum of S$100,000 per new market.

Wouldn’t It Be Nice If The World Was Cadbury?

Truth be told, there’s no perfect scenario or action plan. Businesses need to start to rethink their business models and find ways to streamline processes for maximum operation efficiency, especially when stagflation is becoming the next phenomenon.

Action before it’s too late, don’t say we never ‘jio’ you!

FUN FACT: ‘Jio’ means to invite in Singlish, which is the unofficial language of Singapore!

Paul Hype Page & Co. specialises in incorporation, visa, and other corporate and professional services. With presence in Singapore, Malaysia, Indonesia & Hong Kong, we support our clients through a people-by-design approach, delivering quality services while building relationships that last.

Website: www.paulhypepage.com

Email: [email protected]