It’s a tough time to be a small business owner. Supply-chain issues and workforce challenges are having a negative effect on just about all businesses, but inflation seems to be the biggest culprit—for 91% of small businesses according to a recent Goldman Sachs survey—with increasing energy costs, in particular, playing havoc with bottom lines.
Inflation is considered the single most important problem faced by small business owners, followed by quality/cost of labor and taxes. In an attempt to counteract inflation, about 72% of small business owners have raised prices from three months ago, one of the highest readings since 2017—and 47% of owners plan to raise prices in the next three months.
Raising prices slowly and being strategic, rather than making dramatic across-the-board price increases, is one step to address inflation, but there are others, including the following six:
- Streamline/automate processes. Take a look at your operation and consider if there are better, more efficient ways to get things done. Look at reorganization as an “old school” strategy along with more cutting-edge options like new software or robotic processing.
- Examine profit margins. Look at what your new costs are doing to your margins before investigating solutions to increase them without sacrificing the quality of your products or services.
- Enhance productivity. Work with employees—letting them know how important their contributions are—to get things done more efficiently. You may consider using technologies and apps to track and improve productivity.
- Cut expenses. Reduce your spending as you can. Have too much space? Think about downsizing. Buying products or services that aren’t used? Cancel those expenditures. Also research substituting materials where possible to save money without affecting quality.
- Stock up on supplies. Buy in bulk now—before prices go up even more. This requires capital and storage space, but it could be well worth it if costs continue to rise. Also think about renegotiating contracts with suppliers and acquiring large equipment now, before it becomes even more expensive.
- Focus on new customers. Think about how to become the attractive alternative for customers who have become disenchanted with the status quo. Customer segments and market niches that you might not have considered targeting before may be seeking options to high-priced providers.
The old adage, you have to spend money to make money, may be appropriate in some cases to combat inflationary pressures. And in fact, 23% of small business owners are borrowing at least once every three months. Before you throw in the towel, so to speak, it may make sense to investigate your lending options—even if your credit score isn’t the best.
Need a working capital loan? Small business loan? Equipment financing? All these business loans can be part of a great strategy to ensure your business can thrive despite today’s inflationary pressures. Unlike traditional lenders like banks, whose application and approval processes can be cumbersome and often end with a “no,” alternative lenders are in your corner and focused on helping you make your business dreams come true.
If you have any questions about which type of business loan is right for you and how to apply, give Clear Skies Capital a call at 800-230-9822. You may be pleasantly surprised at what you qualify for.