How Your Business Can Thrive in an Inflating Economy

Business can be an epic battle of survival and the thrills of success can be enjoyed by generations but making it to that point is always difficult. You may wonder, how to plot a course through inflation which is a daunting task for business owners as they grapple with rising product costs, increasing wages, and clients who are becoming more selective in their spending.

“historically where companies that took an active approach to growth came out of the economic distress far stronger and grew better.”

In such an economic environment, companies must adopt innovative strategies to survive and remain competitive. Adjusting pricing models, reducing operational costs, and finding new avenues for revenue are essential steps in building a resilient business that can withstand the pressures of an inflating economy. This opening framework sets the stage for discussing the complex challenges and strategic responses crucial for businesses during these turbulent times. The great benefit of this is we can see historically where companies that took an active approach to growth came out of the economic distress far stronger and grew better.

In the ever-evolving landscape of global economics, businesses are constantly seeking strategies to not only survive but also thrive amidst challenging conditions. The current economic climate, characterized by rising inflation rates, demands that companies adopt a multifaceted approach to maintain their competitive edge. Increasing prices, cutting costs, innovating revenue streams, and diversifying business models are crucial tactics employed by successful firms today.

As inflation continues to impact economies worldwide, businesses are forced to reevaluate their operational strategies. One effective method is to increase product and service prices proportionately to the Producer Price Index (PPI), which tracks the cost of goods immediately post-production. This index is a vital indicator of economic pressures and helps companies adjust their pricing strategies accordingly. Historical data from the first half of 2008, during the early months of the Great Recession, shows that companies that aligned their price increases with the PPI were better positioned to manage the inflationary impacts.

However, merely adjusting prices is not sufficient for long-term sustainability. Top-performing companies go a step further by enhancing their productivity. This involves rigorous cost-cutting measures and optimizing every aspect of the operation to improve the bottom line. An analysis of 5,700 global companies revealed that those that focused intensely on reducing costs and boosting productivity saw median total shareholder returns (TSR) of 27%, significantly higher than those that were less aggressive in their approach.

Here are some common things business owners and managers have done to fight back against inflation:

1. Review suppliers – and start getting bids again
2. Marketing – Can not stop –
   1. Things you can do – Flyers in packaging and bags/boxes to encourage more purchases
   2. Turning dead air into “upsells” using an ON HOLD Message –  On Hold Message & Custom On hold Messages
   3. If your local business –  Using the Post Office EDDM program –  Post Office Program with low mailing costs 
3. Employee Compensation can be in different forms including – Incentives to get them more involved in growing the business.
4. Negotiating with landlords, as rent is often the single biggest expensive aside from taxes
5. Talking to an accountant about changing how you process sales for a better tax outcome
   1. Accounting and Business Review – Rojas CPA national accounting firm  Sacramento: (916) 362-4040
   2. Work with a tax strategy Advisor
6. Network with other businesses that can collaborate on growing together

Moreover, diversifying business operations and exploring new markets are pivotal in cushioning firms against economic shocks. By broadening their market base and investing in innovative products or services, companies can tap into new revenue streams that are less susceptible to the cyclical fluctuations of their traditional markets. This strategy not only spreads risk but also exposes the business to new growth opportunities, which is essential in a volatile economic environment.

The key to thriving in today’s complex economic terrain lies in a balanced approach encompassing strategic pricing, stringent cost management, and continuous innovation in products and services. By staying adaptable and vigilant, businesses can navigate through economic uncertainties with greater resilience and capitalize on emerging opportunities for expansion and growth. This holistic strategy, underscored by historical success stories and economic indicators like the PPI, provides a robust framework for companies aiming to excel despite the challenges posed by inflation and other economic pressures.

Author: Economics The Illinois Insider 

Strategies

This article from our economics team from our online business journal is to help small businesses grow and develop during all economic conditions.  Learn more about Chicago here.