Small business owners are feeling the crunch of inflation, but there are steps to take to solidify your standing. Here's how to get help if your business is suffering.
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by Jenn Morson
Jenn is a writer who specializes in real estate, finance, health care, and education. Her words may be found in The N...
Updated on: November 10, 2022 · 4 min read
Inflation weighs heavily on many small business owners, and few sectors are unaffected. But help is available. Here's a guide to dealing with rising costs, along with practical tips for getting out of financial trouble.
For information on government-sponsored grants and loans, visit www.usa.gov/grants. Be aware that there are federal programs available, but that any website promising "free money from the government" is likely a scam, so make sure you are only applying through an official U.S. government website. Here are other ways to get assistance.
It may be worth considering taking on a loan, depending on your business's current situation. Stacy Cason, founder and CEO of Planetarie, a CBD wellness company, says, "If you need to take a small business loan out, do so with caution. Each business has a unique financial standing and income considerations. Take into account what's best for your company after you assess its financial standing."
Inflation puts a strain on businesses great and small, but with some evaluating and pivoting, you can ride out the wave of rising prices and come out the other side a more efficient and productive company.
When small business owners find themselves in financial trouble, the first thing they should do is assess the current state of all aspects of their business, including costs, earnings, productivity, production, and future projections.
Review spending and earnings. If feasible, small business owners should hire a third party to conduct this in order to maintain neutrality and minimize disagreement among stakeholders. David Farkas, the founder and CEO of The Upper Ranks, a link-building services company, suggests finding trusted legal and financial advisers. "You must invest in a legal team, as well as someone who will examine the finances and tell you the truth," Farkas says.
Are you still carrying products that are performing poorly? Now is the time to assess your offerings and determine which are your bread and butter and which should be reassessed and potentially eliminated. "Products that perform poorly should be removed from your company's manufacturing and rotation cycle. This is my tried-and-true way for small businesses to combat inflation," Farkas says.
In periods of financial strife, time really is money, and if your business practices aren't as efficient as they could be, consider changing that. "You should start investing in technology that can help automate your processes. This way, you'll save time and resources, and have your employees focus more on strategic planning on how you can grow and improve the business," says Vishesh Raisinghani, a financial expert with PiggyBank.
Now that you have evaluated your business spending, you know where your money is going each month and can attempt to lower outgoing amounts by speaking to vendors and others to whom you have a financial duty. For example, if you have leased space, ask your landlord to extend the lease in exchange for a lower monthly rental price. Having a consistent tenant may be more valuable to them than temporarily receiving more rent.
Robert Burns, chief marketing officer of Kaskaid Hospitality and NULEEV, a health and wellness company, says every bill is negotiable and those small businesses feeling the squeeze of inflation should reach out to companies billing them for services. "Your ISP, the lease on your facilities, every bill that the business receives can be negotiated," Burns says. "These companies would much rather give you a discount than lose your business altogether."
Small businesses often hesitate to raise prices, but if done thoughtfully and strategically, increasing your prices doesn't need to translate to lost customers. Benjamin Garden, director of analytics for Pricing Solutions, a pricing strategy specialist firm, says that adjusting prices regularly can keep a small business owner's margins healthy and is customer-centric. "There are a few key considerations—product visibility, competitive pricing, and value-based pricing," he says. "Customers are more familiar with prices when it comes to widely available products." He suggests exploring pricing opportunities for less visible products.
Garden also suggests considering the local market prices for your product and keeping competitive pricing with others. As far as value-based pricing, Garden says, "Price is just a code word for value. If a customer sees the value in a product or service, they are happy to pay higher prices."
This may sound like a scary prospect, but keep in mind that it need not be permanent. You may need to temporarily downsize in order to preserve your small business while you financially recover, but you should also know that once you are in a better position, thoughtful growth will again be possible. Although daunting, this is far preferable to going under entirely.
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