Rising inflation is affecting all segments of society in 2022, including business owners. From the cost of labor rising to the price of gas skyrocketing, the reality of fast rising inflation is affecting many aspects of business. It is certainly true that inflation is at a worse point that we have experienced in a long time. Specifically, the consumer price index for 2021 was measured at 7%, which was the highest 12 month increase since 1982.
One of the main drivers of this soaring inflation is supply issues in domestic and international supply chains coupled with rising demand for goods in the recovery of the first year of Covid-19 pandemic shutdowns. The business environment of rising prices certainly is a challenge that needs confronted by every business. It may be wise to also look at this environment through the lens of being able to gain a competitive advantage in your markets, since everybody is facing the same general challenge.
Here are 7 strategies that business owners, managers, and entrepreneurs should consider implementing to strengthen their position in this inflationary environment:
1. Given the likely rise in interest rates by the Federal Reserve, any debt of the business that could be refinanced should be acted on sooner rather than later, as the cost of refinancing that debt will almost certainly rise in the near future.
2. Consider bulking up in inventory and supplies sooner rather than later to avoid the costs of further rising prices caused by inflation.
3. Consider incorporating more technology initiatives and investment to reduce the business's required total labor hours.
4. Consider putting more available cash into interest bearing accounts and/or investments to position your business to reap the rewards of likely rises in interest rates.
5. Consider reviewing your investment portfolio with your financial advisor to position yourself to benefit the most from the current inflationary environment and likely near future raising of interest rates.
6. Consider outsourcing more work to professional firms than hiring employees. A detailed analysis should be performed to consider the overall costs that could be saved by outsourcing professional level work.
7. Consider tax planning and saving initiatives to increase your cash flow in the near term.
Our professionals here at Cloonan & Associates, PC excel in helping our business clients rise in market share in difficult economic environments. We welcome you to reach out to us to discuss how we can work with you to become a leader in your market during this period of challenge and opportunity.