Inflation has risen like a wave, and a recession may be here. How can your business survive? Here are some tips.
How Inflation Affects Small Businesses
Inflation isn’t great for small businesses and affects them in many ways. Most small businesses have to raise their prices during inflation to keep up with the rising expense of doing business. Inflation causes the cost of labor, materials, and stock to go up, which means small businesses have to match that rising expense if they want to continue earning a profit.
Unfortunately, raising prices can put many small businesses in danger. Many see shrinking profit margins even after raising prices. Inflation also causes small businesses to reduce inventory, offer fewer services, and even lose customers. In the worst cases, many are forced to shut down completely.
Are We In A Recession?
There is no official definition of a recession. However, many use the National Bureau of Economic Research’s (NBER) definition, which says that a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Experts are still debating whether the U.S. is in a recession. The country’s gross domestic product (GDP) has gone down for two quarters in a row. There have also been rising prices and a shortage of labor and other products. These are all common signs of an impending recession. Still, some experts argue that increasing wages and low unemployment rates signal that we’re not there yet.
4 Ways Businesses Can Prepare For A Recession
With serious discussion about the possibility of a coming recession, getting your business ready is a top priority. Here are some things you can do to prepare your small business for a recession:
- Pay off your debt. If you can afford to pay off some of your business debt now, do it. Times are tough during a recession, but you’re still responsible for paying your debt.
- Attract more customers. Having a wide base of customers can effectively “recession-proof” your small business by creating new sources of revenue that broaden your base customer foundation.
- Cut costs. Running a business during a recession is tough. If you can find ways to cut costs without losing quality, you’ll be able to increase your profits and save more for the future.
- Improve your credit score. Your business credit score is separate from your personal one. If you can improve your business’s credit score, you’ll be more likely to be approved by lenders in the future.
4 Ways Businesses Can Battle Inflation
Inflation can cause businesses real problems. But you can battle inflation by taking the following steps:
- Lower prices carefully. By lowering your prices slowly over time, you’ll steadily increase your profit margin while building a cushion for times when inflation may reduce it.
- Increase efficiency. Cut costs by streamlining your business’s processes.
- Bulk orders. By bulk ordering when prices are low, you set your business up for stability when prices increase later.
- Market smart. Finding new clients is a lot harder than keeping current ones. Cultivate strong relationships with your existing customers to retain their loyal business. They may even recommend you to their friends and family.
Prepare For Inflation And Recession With WR Co.
Need some help getting ready for tough economic times? The William Rogers Company is the culmination of a 25-year career developing cross-discipline methods and knowledge for taking businesses to new heights. We help small to medium-sized businesses in Southern California maximize their income and potential for success. Call us today for your business advisory services at 888-297-3321.