Price increases, supply chain fears, and cash flow problems are dominating headlines in 2023. Now the online boom of the pandemic is quietening down, things are settling into a more offline world and many previous rapid-growth businesses have been left in the dark.
It can be a scary time for small business owners to make sales or even retain customers. Interest rates are up, profit margins are tight, and many businesses have thrown long-term goals out of the window to survive short-term.
inflation is now at 7%, although it’s expected to decrease to 5% by 2026, it still means that SMBs are prioritizing their annual bottom line more than ever in any business plan.
In this article, we’ll explore five ways to save money during inflation that you can start implementing today to look after the dimes for tomorrow.
SMBs are often the hardest hit when it comes to inflation. Investment intent is often low, bank interest rates are higher than ever, and any new pricing models businesses need to push are often shunned by their buyers as inflation is hitting everyone.
In all, the effects of inflation can be a daunting time for SMBs, and they’ll need to innovate ways to cut costs elsewhere and survive the drought. Let’s explore what you can do.
Now is not the time to reduce your workforce. Your people are the key to getting you through a recession, they’re not a scapegoat to beating high inflation. The
cost of hiring an employeeis between $4,000-$20,000, not a sum that comes lightly when trying to keep costs down. Keep your staff, and rework their business inputs and goals to make the most of your talent during this time.
At this point, budding entrepreneurs and business leaders may want to consider:
Remember, economists will always say that higher costs don’t necessarily mean you need to cut costs. It’s more that you’ll need to reevaluate costs, invest smarter, and pivot on a provider’s pricing strategy to win lower prices.
If you cut budgets altogether, you’ll struggle to survive the recession and certainly won’t grow. However, if you strategize and streamline spend, you’ll grow via an alternative route you perhaps hadn’t considered before the interest hikes.
This goes for both employees and customers.
Losing an employee can be extremely damaging during high inflation—
1-2x of that employee’s annual salary.
Look at ways you can keep your staff on that don’t need so much of a cash investment. There are other perks you can offer that are time or holiday-related to keep employees happy and sticking with you through it all.
At the same time, take strategic bets that revolve around your customer or client retention methods.
- How can you provide better experiences for your customers?
- How can you build and maintain products or services they love?
- What features are they crying out for?
Upselling to a current customer is
65% more successfulthan selling to a new prospect. Turn your efforts inward to meet customer demand, and see if there’s room to expand on contracts—big and small.
Trying to grow when everyone else is can be tough. Trying to pick up growth at the same time as the rest of the world (after an economic crisis) will see you throwing money at the wall in an effort to stand out in oversaturated ad spends.
What does this mean? Waiting for things to calm down to grow is going to be potentially bank-breaking. Right now, growth channels are quiet. They’re cheaper, they’re less crowded and that doesn’t mean your customers aren’t still looking if what you’re offering is essential to their needs. Capitalize on this.
Take strategic growth bets. Try investing in new growth strategies (e.g: SEO, content, social media influencer partnerships) and make the most of these disruptions in our economic conditions. There’s a high chance you’ll have a great opportunity to stand out and continue growing while all of your competitors are on pause. This will help you to triumph when the market returns to “normal.”
With your most accessible pricing in hand, try to re-engage past customers or clients. If they’ve recently churned due to trying to cut costs themselves, perhaps your new pricing models may appeal.
At the very least, reaching out to past customers is a great way to get top of mind again, so that even if they’re not in a position to invest in your business, perhaps someone in their network is.
If you’re a small business owner or CFO, take a look at our
guide to modern finance managementand see how you can make the most of budgets in 2023 and beyond.