Inflation.
The stomach-curling, awfully scary feeling that you got from this word – I get it.
Inflation affects the purchasing power of both consumers and businesses, especially small business owners. Either it forces SMBs to raise prices and risk losing sales or accept loans to cover some expenses in order to retain their profit margin.
So, if you are left wondering why your favorite coach’s group program or 1:1 prices have skyrocketed through the roof – blame it on inflation.
What is inflation?
Inflation occurs when there is a broad increase in the prices of goods and services over a given period of time., not just of individual items.
It is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. So, when you feel your prices of regular commodities have sky-rocketed, then it’s because of inflation.
In the pandemic alone, over 80% of small business owners had to increase the prices of their offers and service to keep up with the profit margins. This resulted in a direct sales drop too with consumers preferring to naturally choose the cheaper option.
Some were forced to make drastic, cost-cutting choices both on the business and personal front by compromising on the quality of support or taking loans. Employees and contractors were laid off in bulk (Remember the recent layoff spree? Twitter, and Meta to name a few- yep, inflation).
It doesn’t stop here – due to the dipping of the profit margins, the global economy took a hit too, and businesses are left with little to no protection against price increases in almost all marketplaces.
Inflation also resulted in an increase in exchange rates as a result of anti-inflationary measures. These measures also increase cross-border taxes and tariffs, making imports and exports unfavorable for small businesses. (Now, you know why you were paying a hefty amount as a tax on your international payments to get paid yourself!). Over here in Australia, I especially felt this one the most.
So, what does this mean for small businesses?
Inflation is a new challenge for most small business owners that are currently operating.
For small business owners, it was a short wave of respite when the economy recovered a little bit after the pandemic and consumers were willing to spend again.
But with the rising inflation rate, people again are extremely mindful about their purchases, spending more on essentials, making their budgets tighter without any change in habits. Like cutting lower-margin goods and services from the offerings to focus on areas that would bring the greatest return on investment. So, until and unless the consumer thinks that your business is ‘essential’ for them – they would be thinking twice before investing in you or your services.
Now, as a small business owner, much can’t be done to influence the level of inflation. But, you can definitely employ strategies that would help you prepare your business for the rising inflation levels.
5 Tips on How You Can Safeguard Your Online Business During Inflation:
1. Automate Systems and Operations:
Take inflation as an opportunity to re-evaluate your business operations. More often than not, the repeatable tasks like invoicing, following up with invoices, collecting payments, lead capturing, and keeping these lists engaged and warmed up – that you are putting your valuable time into, can be automated.
Consult an operations expert to see how you can automate to save your business expenses. You can also analyze your business operations yourself to deploy automation to the processes that don’t require you to slog precious manual hours.
2. Cost-Cutting:
Now before you go on a cancellation spree and try to do everything yourself, note that cost-cutting is talking more about building a lean operation. What are unnecessary tools, apps, or tech that aren’t serving your business goals, but costing you? Now is the perfect time to review your expense report, and cut unnecessary subscriptions/apps/tools that add to your costs. Cost-cutting can also look at where you are spending your time (see more about this in Point 1 and Point 5)!
With your most important resources, your time, and your capital, how can you utilize them better?
3. Strategic & Smart Pricing:
Now that you have tightened up your wallet, you need to take a thorough look at the pricing of your product suite.
In inflation, there is always the possibility that new client acquisition slows, so how can you be strategic with your offer suite to keep your business funds consistent? This can look like adding more internal offers to keep current clients, adding passive income streams, and new upsells/downsells – the possibilities are endless!
Strategize the pricing of your products & services for it to yield you marginal profits rather than complete losses. Even though it’s critical to adapt to changing financial climate and modify pricing as needed, remember that inflation isn’t forever.
I recently had an IG Live with a financial advisor and accountant Crystal of MyFinanceSpa. What came out of our discussion was that pricing isn’t just about covering expenses or reaching a certain profit margin; it is about pricing for the opportunity. Meaning, our prices should also be strategically used to fund future opportunities.
What opportunities for your business are you thinking of?
A new hire?
An investment into bettering your product?
Keep that in mind.
4. Outsource Smartly
It’s time to don those smart business pants. While you are cutting costs but do not ever compromise on the quality of work. Instead of hiring in-house – assembling a remote team is an efficient option.
If there is a task where your presence is not non-negotiable, hire or have systems in place for the same. (Btw, I am here to help you if you are confused about whether to hire or to automate).
5. Out-of-the-box Marketing
In trying times like these, you feel the added pressure to sustain your business and to keep your customers happy. One legit way that you can use to increase your customer satisfaction and sustain orders is, to offer promotional discounts, collaborate with other small businesses and increase the chances of being referred to.
Checking in on past clients to see how they are coping with the rising prices – helps you to form a deeper relationship with them too.
There you have it!
Inflation is tough on everyone. It can be a lot scary and if I am honest – confusing too, to think about the future in these unpredictable times, especially as a small business owner. Use these necessary steps to be prepared for any difficult situation that may arise.
As a reminder, here are all 5 again:
Automate Systems and Operations:
Cost-Cutting:
Strategic & Smart Pricing:
Outsource Smartly
Out-of-the-box Marketing
If that made you feel equipped to keep your small business running smoothly,
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I’m Elisabeth—
I live in Melbourne, Australia, but I’m from the States (Washingtonian through and through). I’m a cat-mom, wifey, and in love with a good workflow; it gives me that warm, fuzzy, Christmastime feeling. My goal is to help hard-working service providers stop having to choose between creativity and productivity to build a successful, sustainable business.
