Most business owners are using a combination of tactics to overcome the effects of double-digit inflation.
Here are a few of the most common approaches…
📌 INCREASE PRICES
The obvious one first. An increase in pricing can generate a disproportionate percentage increase on your bottom line, all things being equal. Meaning that a price rise to counter inflationary pressures in the supply chain can also help fund wage increases within your business. It goes without saying that you need to be strategic about charging higher prices and strike the right balance between profitability and the price sensitivity of your customers.
📌 AUTOMATE TO REDUCE COSTS
A major phase of restructuring is already well underway in the world economy, whether we like it or not. The transition away from human labour towards automation is happening in unexpected places. Let’s face it, your ability to reduce costs has a bearing on the prices you charge and can ultimately decide whether you sink or swim. But also, very few companies right now are untouched by labour shortages, which are creating bottlenecks and increasing costs. Automation can help overcome this challenge.
📌 STOP OFFERING DISCOUNTS
Many businesses have woken up to the damage that discounts can do to their business in an inflationary environment. Focus on profitability rather than extra sales for the sake of it.
📌 FLEX YOUR CONTRACTS
When it comes to inflation, contracts are a powerful tool. Contracts can help businesses lock in prices. Likewise, they can give you flexibility, without holding you to undeliverable commitments. Easier to get this settled upfront than attempt renegotiation later.
📌 EXPLORE ALTERNATIVE SUPPLIERS
There’s more reluctance to look at other options here, than almost anywhere else. Inertia, loyalty, and procrastination can all play a part. There can be risks and short-term costs associated with making a switch, but there’s always the option to dip your toe in the water first.
📌 USE INVENTORY AS A HEDGE
Not possible for every type of business, but plenty of companies are investigating ways to increase their existing inventory or secure future supply at current pricing, while they have the chance.
📌 THINK TWO STEPS AHEAD
When inflation is running at double-digits, it’s even more important to double down on your cash flow projections and take decisive action ahead of time.
Nobody knows how long high inflation will stick around. There are plenty of predictions, but nobody knows. So it’s a good opportunity to look a few steps ahead.
Tech is accelerating automation, but it is also enabling high-skilled roles to be managed remotely… and offshore. These are the sorts of changes that can take time to implement, so there’s no time like the present to get started.