Building upon last month’s blog, “Small Businesses Struggle to Find Good Workers: Overcoming Hiring Challenges in a Post-Pandemic World,” we’d like to help our clients and prospective clients find ways to cope in their businesses amid rising costs and the current state of high inflation.

The Economic State of Affairs

We’re all paying a lot more for goods and services than we did last year. The U.S. inflation rate is at 9.06% as of this writing—the highest in four decades—compared to 5.39% last year.

Wholesale costs of food for restaurants and hotels have nearly doubled, and the same goes for the fuel needed to transport goods. Rents on space for retail and other businesses are through the roof. Manufacturers are paying more for parts, fuel, and transport. Of course, the end result is that these increases are passed along to the customer who we are desperately trying to keep.

The U.S. Chamber of Commerce Q4 2021 Small Business Index states that 71% of business owners report that rising prices have significantly impacted their business in the past year. A Spring 2022 study by SCORE reported that 93% of 1,199 small-business owners found it necessary to increase prices by 11% to keep pace with inflation. A recent American Express article cited a business owner with a shop on Amazon who has seen a 26% increase in costs for raw materials to make products and 30% wage increases in some of their jobs due to inflation.

What Can Businesses Do to Cope?

This is a tough spot to be in for businesses selling goods and services. On the one hand we are faced with increasing our prices and keeping the business profitable, but on the other hand we don’t want to lose customers who refuse to pay the higher cost. What can businesses do to cope?

While we cannot singlehandedly solve the economic dilemma we’re in, we’ve put together a list of some things you can do to help ease the situation and make it more manageable.

An Inc. article written by Shama Hyder, founder/CEO of Zen Media, “How Businesses Can Survive Inflation and Recession,” lists three down-to-earth ways that may help businesses cope:

1. Raise Your Prices the Right Way. Rather than dramatic across-the-board price increases, raise prices slowly in modest increments and only on the products that impact your margins the most. Maybe increase prices on things that the customer is less likely to notice. For service providers, communicate how your services can benefit businesses in the long run, even at a raised rate, so they can justify the investment.

2. Refine Your Business Operations. Identify core services/products, focusing on those that provide the best ROI. Cut products/services that aren’t being used. Increase efficiency to save on operational costs. Train staff in weak areas and determine how they can serve your company better.

3. Revisit Your Finances. Capitalize on financial solutions that are available to incentivize spending, like credit card rewards and high-yield business savings accounts.

The American Express article offers additional helpful suggestions:

1. Streamline and automate processes. Examine processes, e.g., reorganizing, exploring automation and robotic processing, and researching software that can make business processes like scheduling, order taking, billing, or collecting payments quicker and more efficient.

2. Analyze profit margins. Re-evaluate costs, analyze what margins you’re facing in today’s economy, and investigate solutions to increase those margins. Possibly something as simple as looking into vendors that provide similar quality at reduced cost can increase margins substantially.

3. Cut expenses when and where possible. Consider downsizing your office space or having some staff work remotely. Search for alternate products or ingredients that will save you money.

4. Stock up on supplies now. Stocking up on core materials can help tremendously. Evan McCarthy of Sporting Smiles, a provider of custom dental products, explains how this method worked for his company: “We stocked up, because every time we ordered supplies, the price kept rising. Our cardboard box supplies had three major increases in 2021.” Also consider renegotiating contracts with suppliers.

5. Be ready for new customers. Believe it or not, “Inflation automatically creates new customer segments,” states Stuart Robles, a partner at Briggs Capital, a mergers and acquisitions firm for small and medium-sized businesses. “Customer segments and market niches previously unreachable can become attainable as your company [may be] seen as a beacon of light in terms of potential lower prices and rates.”

We hope that this blog may help you weather this period of high inflation. And keep in mind, it won’t last forever and things eventually will become more manageable, as they always do.

Choose The Hire Authority for Employee Background Screening.

Remember, hiring the wrong employee can also cost you a lot of money in the form of theft, fraud, accidents, low productivity, damage to your reputation, and even lawsuits.

When hiring new employees or doing periodic employee background checks on existing employees, it’s important to hire an experienced and professional firm like The Hire Authority to do a thorough screening.

The Hire Authority is also expert in compliance issues regarding state, federal, and county laws. Failure to comply can also cost you big in the form of fines and even shutdown of your business.

We’d be happy to talk to you about screening your employees.

Call us at (508) 230-5901 or visit our website www.hireauth.com

with any questions you may have.

 

The foregoing should not be construed as legal advice. Employers should always consult their own legal counsel for advice on labor and employment matters.