Will Your Small Business be Affected by Inflation?

Since the pandemic changed the world, consumers and small business owners have been dealing with supply chain shortages and inflation. Inflation was first noticed in March and April of 2021 as soon as the COVID-19 vaccines became available to the public. Businesses began to reopen and business owners and consumers were faced with supply and demand issues.

Inflation started when consumers started to spend and companies had trouble getting a hold of stock to fill those orders. The Bureau of Labor Statistics states inflation increased at a higher rate between March 2021 and September 2021 than it had at any time in 2020. Other data shows small business owners are getting hit hard. One in three small business owners listed inflation as their top concern.

Explanation of Inflation

Inflation is a measure of the progressive increase in the prices of services and products over a set period. Consumers have to pay more money as the cost of services and products increases. Many people think of inflation as a bad thing, but this increase in pricing for services and products always occurs.

The Federal Reserve aims for an inflation rate of 2% each year because if pricing is too low, it will weaken our economy. The problem comes when inflation is too high and it becomes a financial burden to businesses and consumers.

How Will Inflation Affect Your Small Business?

Small businesses have found it challenging to deal with rising costs since the pandemic began. COVID-19 fast-tracked the ongoing supply chain issues and access to goods became harder which in turn caused prices to rise. These are some of the ways your small business may have been affected by inflation:

• Increased Prices
• More than eighty percent of small business owners have increased their prices to counter inflation. This can be a risky move as some of your customers may not want to pay these higher prices.
• Tighter Profit Margins
• When your costs increase it often results in tighter profit margins. When margins tighten it will be harder for you to reach your margins and continue to profit over time.
• Higher Cost for Services and Supplies
• One survey conducted among small business owners showed they now have to deal with rising costs since the pandemic began for their services and supplies. These are items needed to run their business, and when these rise, most business owners see a twenty percent increase in their operating costs.?
• Cut in Overhead Expenses
• When small business owners experience an increase in the cost of the services and supplies they need to operate, they have no choice but to cut down on overhead expenses. A lot of small business owners have found they've been forced to cut back on inventory, marketing costs, and other operating costs to save money.?

How to Deal With Inflation as a Small Business Owner

Inflation is always ongoing, even when as little as 2%, because the value of what you get constantly changes. However, the current inflation we are dealing with will eventually level off, and some sense of normalcy will return. Until that happens, small business owners have to find a way to manage the impact it is having on them.

The first choice a small business owner should make is whether to remain small or focus on growth. You have two choices in today's environment and that is to stay lean or commit to growth. If your choice is to remain as a small business, you should focus on keeping your expenses low. Cut back on the things you do not need to operate your business and look for ways you can reduce your production costs.

Saving money is not your only focus. You will also have to look into investing your money. Find a way to multiply your money outside and inside your business. The investments you make need to at least keep up with inflation, or outpace it would be the best.

If you choose to focus on growth, you can begin by increasing your marketing and reviewing your pricing strategy. This choice also involves investing in your business. Investing in technology would be one method to improve your productivity and control some of your overhead costs.

Other Strategies to Help Your Small Business

Inflation is a concern to many small business owners. Another concern is hiring the right talent to help your business grow and keep it safe. Grow Simply can help you hire the right person to fill any open position. We will perform background screenings and checks to ensure the right talent is hired for your business. Hiring the right person can help your business grow and keep you safe from someone who has given false credentials that cannot fit into your company's culture.