How to grow your business during inflation
Inflationary periods can be a challenging time for start-ups and new businesses. Growth might seem like a way off, but companies can put the pieces in place to grow their business while simultaneously weathering the inflation storm. It’s important to focus on emerging from this period in a good position, for your business and your stakeholders.
Currently, inflation is at 8.6% as of September 2022. It hit a 40-year high in July, having reached 10.1%. While the slight dip is quite encouraging, it is expected to reach 14% in Q4 of 2022. Either way, and it can be quite an unsettling thought, but no one knows for certain what’s going to happen. The only thing companies can control is their response to it. It’s time to take action and not only overcome this time of economic turbulence, but to grow in spite of it.
Spend and cut costs wisely
The general advice for growing your business during inflation is to cut back on expenses where you can. While it’s important to save money during inflationary periods, it’s even more important to ensure that those decisions aren’t the wrong ones. If you downsize your office to save money, who will this effect? If you make someone redundant, will that save money or will you lose money in the long run? There’s a lot of fear around inflation that can cause people to go into panic and survival mode, finding every which way to save as much money as possible. But remember – it will pass.
Things that can be cut (without having to divulge too deeply into how useful it or they are) include products or services that are no longer being utilised either at all or efficiently. You could also consider substituting materials and products for lower-cost ones. Yes, this saves you money in the short term, but it also helps you look at your spending through another lens. Where you could have gone for an option that you thought was the best for the company in the past, you might look at this differently and recognise how a different option would work just as well. This will save costs in the long term, increasing your budget that can be used on promoting growth.
Scale back the work
The golden rule is to devise what adds value and what doesn’t, what’s necessary and what isn’t. Labour costs are increasing, so looking at the work itself with a fresh mindset can help reinvigorate how the work is done and how efficiently it’s done. Companies can take a look at what activities are performed to complete the work and how those activities are performed. This not only saves money, but it helps define what makes the company tick, giving them the opportunity to put money and labour resources into areas that will help them grow.
There are so many benefits to automating and streamlining processes, particularly when you’re looking to grow your business during inflation. We’ve all heard the saying ‘you have to spend money to make money’ – investing in improving processes can lead to great rewards. Transforming time-intensive tasks into streamlined, quick, and automated processes free up workers’ time, increases the chances of the work being done correctly (all humans make mistakes!), and promotes business stability.
Research carried out by Harvard Business Review found that companies that invested in automation prior to the pandemic have weathered the storm better than others. Now, we’re facing another bout of economic challenges and for an unknown period of time, so nailing down those processes is crucial.
With automation comes productivity. When your employees have a chunk of time freed up to focus on analysing, strategising, and planning, you’ll likely see it in your profit margins. There’s a good chance that this will improve employee morale too. Most workers don’t want to be doing the ‘busy work’ that keeps the business ticking, especially when it could be automated. They want their skills utilised, their hard work paying off, and their value recognised.
Companies can use certain applications and technology and track, monitor, and improve productivity. But the labour pool is limited right now, so it’s crucial that changes are made to work with employees, not against them. It might not work as well if employees think they’re being watched to ‘catch them out’ – employers and employees should be improving productivity together.
Maintain good relationships
For the most part, customers expect price increases due to inflation, but it doesn’t mean they like it. Supply-chain constraints leave a lot of businesses no choice but to up their prices and leave customers no choice but to settle for those higher prices, but there’s a limit. Extreme price gouging could do more harm than good, damaging the solid customer relationships that you’ve been building. If a company can figure out where to push prices and by how much, it can maintain and even acquire a customer base, which will ultimately help them grow in the long run.
There are a couple of ways that companies can support customers to nurture long-lasting relationships. They could take a look at the customer’s needs and identify the products that can be substituted for ones that cost less. This not only helps the customer save money, but being helpful and honest also increases their chance of retention. It’s also important to explain the rationale behind increased prices, to help customers understand that this wasn’t a flippant decision or a means to increase profits under the guise of inflation. Communication, as always, is key.
It’s important to remember that inflationary periods are temporary. How companies push through the crisis will prove their value beyond this current economic turndown. They’ll be more attractive to investors, and they’ll keep their stakeholders and customers happy. If you’d like to speak to one of our accounting specialists and be advised on how to best cope with the challenges from a financial point of view, please get in touch.