The current spike in inflation has resulted in price hikes across most industries. Gas, food and rent costs recently reached a four-decade peak, and business owners are feeling the economic effects. While inflation rates are dropping slightly, higher prices are expected to last for the foreseeable future.
There are many ways you can help navigate your company through inflation and even take advantage of growth opportunities. Strategic responses to inflation can potentially drive higher revenues, help employee retention and even strengthen client relationships.
1. Revisit financial investments
Businesses with an abundance of cash should consider investing it in higher-yield assets with growth potential to keep pace with inflation. If you have a variable rate loan, consider converting it into a fixed-rate loan so you’ll have greater certainty of your monthly interest costs and can budget accordingly.
You might also think about investing in property and equipment because these assets historically keep pace with rising costs during inflationary periods. Consider scheduling a meeting with your banker and other financial advisors to discuss the best investment options for your business.
2. Fine-tune communication
Encourage open communication between you and your associates. It’s no secret that finding and keeping good talent in today’s job market is challenging. When it comes to employee retention, never underestimate the power of transparent and empathetic communication.
During this period of inflation, many clients will be reconsidering their expenses, and you don’t want to end up on the chopping block. Maintaining and strengthening connections during instability is crucial. Consider scheduling meetings with clients and prospects that you don’t interact with on a regular basis to nurture your relationship base.
3. Evaluate your relationships and trim unnecessary expenses
Cut back on nonessential expenses by carefully reviewing your production and operational costs. It may also be an ideal time to implement ‘lean management,’ a set of principles created to improve the efficiency of your processes and reduce waste.
The hard truth is that clients and employees who aren’t the right fit could be draining your company’s resources and you may be missing out on more profitable opportunities. Non-essential roles on your team may be taking up too much of your team’s budget. Additionally, some clients may not be able to keep up with changing costs or may take up too much time and resources with not enough return on investment.
4. Examine employee wages
The higher prices of goods could be taking a toll on your team’s take home pay, and employees may want to renegotiate their compensation. Prepare for this by having a budgeting plan so you can respond as you see fit to a possible influx of requests from members of your team.
Wage pressure can happen at the associate, supervisor and executive levels. You may not be able to alter your budget to meet every wage adjustment request that you’d like. However, conversations surrounding compensation can be easier on both parties if communication is clear and transparent.
Consider taking a step beyond your regular employee wage review to partner with a compensation specialist. They can thoroughly evaluate your wage scale, providing you with objective data to determine appropriate compensation for team members of all experience levels.
5. Rethink pricing and marketing strategies
Rather than implementing an across-the-board price hike, consider targeting price increases to specific product or service lines where customers are most likely to be receptive. Conduct competitor research to gauge the pricing strategies of competitors to ensure your organization is aligned with the marketplace. You can also focus on boosting sales through creative marketing approaches such as cross-selling to existing customers, offering referral discounts or introducing special promotions.
Remember to consider the big picture when making tactical shifts in your business plans as the current economic environment is unlikely to persist long term. To learn more about inflation trends and get tips on how your business can respond, download our Inflation Outlook.