Survival Strategy for Your Small Business Amid a High Inflation Environment
“60 may be the new 40 but the 100-dollar bill is the new 20.”
It seems these days everybody’s talking about inflation. Things are getting so expensive that a dozen eggs now cost $3.99 at my favorite grocery compared to a month ago when it retailed at $2.90. At the rate the prices of goods are skyrocketing, pretty soon I will have to put a tank of gas on layaway.
It’s been nearly 30 years since inflation in the U.S. exceeded 4% and nearly four decades since the country experienced an extended run of rising prices. Although U.S. inflation eased to 7.7% in October from a high of 9.1% in June — the overall impact on day-to-day living has been substantial including subsequent interest rate increases by the Fed.
So, what is driving inflation?
- Bad monetary policy — the central bank “printing too much money” which devalues the currency relative to the value of real goods and services — driving prices up.
- Corporate Profits — companies have been increasing their prices — driving prices up.
- Rising Inflation Expectations — a psychological explanation, which holds that if the public thinks prices will rise, that alone can drive prices up.
- Supply Constraints — bottlenecks in the economy creating shortages of key goods (e.g. energy and other commodities) — driving prices up.
- Demand Pressure — an economy that is running “too hot” with excessive demand forcing buyers to pay more — driving prices up.
- COVID Small Business & US Citizen Assistance — the fed & state provided needed assistance (tax cuts, stimulus checks, extended unemployment benefits, PPP, EIDL) giving essential (and many times extra) cash to spend — driving prices up.
- Wage Increases — driven by the limited supply of labor and demands for higher compensation — drive prices up.
So, what can small business owners do?
- Be Flexible — rethink your business approach, look for alternative sources, innovate as needed, and pivot to new markets.
- Review Your Business Financials — take a careful look at your revenues and expenses, ramp up debt repayment and/or…