Inflation remains a major concern for many small business owners in the United States. As during the pandemic, many are struggling to adjust to rising costs and pressures on profitability.
In “Megaphone of Main Street: Inflation & the Economy,” SCORE, a national organization of business educators, polled 1,000 small business owners about their current concerns about the economy and inflation. Almost a third (30.5%) of small business owners cite inflation as one of their top concerns, and 62.5% are “generally concerned” about inflation as they see price increases.
Entrepreneurs who took part in the survey indicated that they were struggling for a number of reasons:
- The profit is reduced by almost half to three (62.7%).
- Traffic has more than halved (58.6%).
- Spending increased by a slightly higher percentage (59.5%).
- Vendors and suppliers charge high fees for most small businesses (65.7%).
Overall, the survey paints a picture of the ongoing problems facing many American entrepreneurs.
How do companies react to inflation?
The SCORE survey revealed that some of them are looking for more profitable customers, some are changing their product line or developing technology, and most of them are increasing their prices. Just over half of business owners (54.8%) said they felt they had to raise prices to keep up with rising market prices.
“Small business owners are known for being resilient and finding creative ways to adapt and thrive,” said Betsy Dugert, SCORE’s vice president of external affairs. “In order to increase profitability and remain profitable, many take active steps to address problems in the economy, such as B. finding more profitable customers, changing product offerings, or improving technology, but most are raising prices.”
Here four small business owners share the strategies they are currently using to mitigate the effects of inflation:
1. Consumables before purchase; use lines of credit
Aaron Mulherin, owner
AM window repair
“In the past we always used formulas and tables for approximation, but now even the formulas are just guesswork without exact citation from our material.
“In order to set prices, we have to buy the materials at least six months in advance. Failure to do so may result in significant price losses between the date specified and the time of purchase. This of course leads to liquidity problems, which is why we negotiate credit terms with suppliers for large orders, invoice materials as quickly as possible and use lines of credit to cover shortfalls.
2. Prepayment for long-term contracts and services
Grant Cardone, CEO and Founder
“At our real estate company, Cardone Capital, we strive to secure as many properties as possible in good locations, knowing that inflation increases income-generating property valuations and rental income. For example if we were happy with the rent for office space In the last 24 months we have bought our office space.
“We are also willing to pay upfront for Financial planning services that we know are long-term and ongoing. This justifies current prices and reduces uncertainty.”
3. Continually improve internal software efficiency and integration
Glen Bimani, CEO
We built our own CRM for just over $28,000 and the maintenance costs were only $75 per month, and another company rented for $8,750 per month.
4. Raise prices while trying to maintain customer satisfaction
Elliott Smith, CEO
Ohana Addiction Center
While not ideal, it is more necessary than ever as the number of suppliers and the cost of goods sold continue to rise. The key is to balance this one point with inflation projections such as how long inflation will remain high And how long can we reduce margins without affecting customer acquisition due to price increases. It’s a balance between maintaining competitive prices and maintaining a profitable business.
“Doing business in an inflationary market is like a long ride on railroad tracks. The speed is too fast to slow down, the cars are piled up, and the acceleration is too fast, The train loses its carriage and derails.
Free help for small businesses struggling with inflation
Business news today, like these business owners, you’re probably working on a strategy to help your business stay competitive as costs rise without losing significant market share. Consider doing what Mulherin and thousands of other entrepreneurs are doing: getting free mentoring through SCORE.
“We had a SCORE mentor who was very helpful in discussing and exchanging ideas,” he reports. “We plan together and adapt when things change.”