In this challenging environment of historic inflation, it is not uncommon for small businesses to experience cash flow problems. A recent Small Business Index report showed that the impact of inflation has been one of the top concerns of small business owners in 2022. While there remains optimism among many about the overall improvement of the economy, the high costs of goods and services is forcing consumers and business owners to reevaluate their spending.
Small business owners are at the mercy of inflated costs just as consumers are, and many are finding themselves paying more for supplies that now take longer to arrive and to replenish. While passing the higher costs on to customers may seem inevitable, it is important to remember that consumers are being squeezed by many businesses at once, and most people are looking for ways to cut spending: your product or service may be last straw. Before unilaterally raising prices on your products and potentially driving away some of your customers, consider some alternative ways to combat inflation without alienating your consumer base.
Before resorting to price increases:
If your business typically bills customers for a service, look into ways to incentivize early payments so that your cash flow is consistently high. Consider small discounts for early payments or a discount that can be applied to a future order—this encourages people to pay quickly and also to return for additional purchases.
If you have products or services that work compatibly with each other, consider bundling them for small reductions to create larger dollar amounts per sale. Choosing higher-end products to add to the bundle may help not only increase profits, but also help move some of the pricier, harder-to-sell items.
Now is the time to lean heavily into your referral system. Offer customers discounts or incentives for referring friends and colleagues so that you can expand your pool of people to market and sell to. Encourage positive online reviews and share them on your website and through social media. Increasing traffic and volume may help you postpone or reduce the price increases that are necessary.
If your product or service is for a niche market or relies on an uncommon expertise, look for additional ways to generate income from it. In addition to running your business, consider freelancing on the side or offering consulting services to other businesses. If your business uses specialized equipment, consider renting it out when not in use in order to bring in extra income. Look for side gigs that complement your skills and products, even temporarily, just to keep money coming in consistently.
If your business operates primarily in an office, consider remote and hybrid work options for employees whose in-person presence is not essential to their job functions. Reducing the amount of people needed in the office will result in reduced overhead expenses, as well; save money each month in reduced utility bills, less office equipment, and possibly even a smaller leased space. Online tools for businesses enable administrative and bookkeeping employees to work from anywhere. Cloud-based services for businesses offer affordable access to sophisticated payroll and accounting tools that enable you to track spending, send invoices, pay bills, and manage payroll from anywhere.
Combating inflation without raising prices requires a multifaceted strategy, and not every company can approach it the same way. You have to play to the strengths of the industry you are in and cut extraneous expenses in ways that won’t impact your ability to meet customer demand. In the end, some price increases may be necessary, but they may be smaller and staggered among products if other cost-cutting solutions are integrated as well.