Inflation: A Primer for Small Business Owners27/07/2022
Inflation has surged and is anticipated to grow much more as a result of increased demand, rising energy prices, and supply chain concerns. Just how will these price hikes affect your business, and what can you do about it? The questions and answers below will help you get your company prepared.
Explain inflation to me.
If prices across the board start going up (not just for some things, but for everything) then inflation is rising. What this means is, you’ll be able to get a lot less for your money this week than you could last week. In other words, as time passes, the purchasing power of money decreases.
Inflation is growing, but why?
People spent far more after the pandemic when the economy was reopened, causing the demand for food and drink, petrol, clothing, and dinners out, to spike. As a result, inflation has risen.
This was exacerbated by a lack of building supplies and computer chips. Shipping containers and truck drivers are scarce, making it more difficult and expensive for firms to obtain goods, resulting in higher costs as a result of rising demand.
In other words, inflation is caused by too much demand and not enough supply.
What might this entail for the business environment?
Increasing inflation could have several consequences for UK business which, taken together, can have a significant impact on a company’s bottom line.
These include increased costs of raw materials, longer waiting times for the supply of these materials, higher shipping costs, increased labour costs, and sharply rising energy costs.
What can I do to get my company ready for inflation?
For firms that are affected by inflation, there are a variety of remedies available. There is a lot of work involved in determining which activities will have the greatest impact. For instance:
You could examine your pricing. Rising prices may result in fewer consumers, but you may also introduce new goods with greater margins or lower the price of a popular service or product to encourage future purchases.
Your organization’s overheads can be reduced by optimising business procedures and analysing all costs along a manufacturing line or service offering.
Loyalty is priceless, so treat your current customers well. Keep your consumers happy by going the additional mile for them, and they’ll do the same for you. Because acquiring new clients is time-consuming and expensive, you should focus on retaining your existing ones.
Flexible business loans can help you improve your cash flow or meet rising expenses, but you should get professional advice to ensure that this is the best course of action for your particular situation.
If you want to discuss your worries about inflation and what to do about them in greater depth, get in touch with JW Hinks on 0121 456 0190. Our friendly team of experts can help ensure you are doing everything in your power to prepare your business sufficiently.