Surviving Inflation (and Recession) as a Small Businessby Elizabeth MacDonald
Unless you’ve been living under a rock, you know we are living in tough times. Inflation is at an all-time high and a recession is looming. This has already impacted, and will continue to impact, small businesses in big ways. If you haven’t put a plan in place yet, it’s time to look at your business and get those hurricane shutters ready - this storm is far from over.
Surviving Inflation (and Recession)
Know Your Numbers
The nitty-gritty strip down of finances is needed. Every single dollar spent in the last year should be accounted for and evaluated. Where did you overspend and what can you learn from your spending patterns? Find your faults and change your habits, rip the band aid off.
Look closely at your smaller numbers, the things you think you cannot change. Can you shop around for lower cost insurance policies or internet? Can you print less or save energy by unplugging items and keeping lights off in areas not in use?
Review Your Gross Profit
While looking at your out-going finances is important, understanding your profit margins are equally necessary. Know what items are bringing in the most revenue and evaluate your retail prices to look for opportunity to increase your bottom line.
Find Your Tribe
This is not the time to go at it alone. Your peers (aka: competitors) are in this with you. Together, you all have the knowledge to help one another. Create a group within your network and exchange ideas and information about what is working (or not). You can talk about everything from supply chain issues to marketing tactics.
Hire a Financial Advisor
If you do not have a trusted financial advisor, start shopping for one. A newbie may not be the way to go; you want someone who has lived through a recession and understands what may be coming.
Be Honest: Don’t Wait
You cannot wait out this inflation (or recession). Just because you’ve stayed afloat this long doesn’t mean it will be smooth sailing. You need to act now and have plans in place. Best case scenario is that you’ll have excess funds rolling over!
If You Find Yourself Slipping…
If you start to see a pattern or a slow period where finances become overwhelming, remember you can still help yourself.
Cut Costs: Only purchase necessities and items that bring in money.
Seriously look at what you are spending money on. Evaluate the priorities and costs of each and every purchase. Weigh what is costing you versus what is aiding you. Certain purchases bring in consistent revenue, while others sell slower or act more as décor. It’s okay to trim things down through this stage of our economy.
Last case scenario, but if you need to borrow money, make sure that you do it on a line of credit that is NOT personally guaranteed. This ensures that you are keeping business and personal finances separate.
Advice to Use Now
Do Not Burn Bridges.
If you work closely with other small businesses and have purchased from them for years, do not drop them for a cheaper version. They are in the same boat as you. Instead, have an open line of communication and consider pairing down your order if needed with plans to continue your relationship. You do not want to jeopardize the quality of your products – nor do you want to support the monopoly that is Big Business during these times.
Show Your Love.
Retention rates aren’t stellar right now, so show your employees you love them. Show your suppliers you love them. Show your clients you LOVE them. This may seem daunting or near impossible while money is tight, but you cannot lose their support. Simple gestures go a long, long way.
We are all in this together – and we will all come out stronger, but we need to be proactive.