Today, small businesses are coping with inflation, higher borrowing costs, and increased operating expenses by implementing various strategies. These might include adjusting pricing, exploring more efficient operational practices, renegotiating supplier contracts, and closely monitoring cash flow. Adapting marketing strategies and embracing digital tools can also help them navigate these economic changes.
Normally, small businesses might need to gradually increase their prices to account for rising costs, but with inflation eroding profit margins businesses that have a reliance on a single product are now more vulnerable to market fluctuations. Unfortunately, there has been a steep increase in costs, requiring careful consideration of competitive pricing and customer sensitivity, all while small business owners try to maintain margins. To combat margin compression, the focus should not only be raising pricing, but also finding ways to streamline operations and reduce waste thus offsetting increased costs. For these reasons, it is important to regularly review expenses to identify areas for cost reduction. This could include cutting non-essential expenditures, renegotiating leases, or switching to more cost-effective suppliers.
Some effective actions to help small businesses navigate changes in the market would be to consider renegotiating contracts with suppliers and vendors for better terms, discounts, or bulk pricing which can lower procurement costs. Building strong partnerships with suppliers can lead to more favorable arrangements.
Embracing technology can also increase efficiency and reduce costs. This might involve adopting digital marketing strategies, onboarding more robust e-commerce platforms, and utilizing cloud-based tools to manage operations and customer interactions.
All small businesses should have a plan and write it down. Then measure against that plan. Developing a financial plan that considers inflation and higher borrowing costs is essential to any successful business. This plan can guide decisions on when to invest, borrow, or hold back on expansion. Remember that the approach may vary depending on the specific industry, market conditions, and individual business circumstances, but being flexible, adapting and being innovative are key traits that can help small businesses thrive in a changing economic landscape.
Lastly, don’t wait to think about your potential need for financing. Use your plan to think ahead. At Apex Commercial Capital we go Beyond the Numbers to help your business succeed. Amidst these challenging economic times and the uncertainty of inflation, Apex Commercial Capital stands to assess your unique situation. Apex has more than 30 years of proven financing solutions for commercial real estate and equipment finance and is a beacon of stability, offering a path forward when navigating through these inflationary waters. Trust Apex Commercial Capital to be your anchor in the storm.
Andrew Tauber is the President of Apex Commercial Capital and Executive Vice President, Managing Director of Firstrust Bank Lending Subsidiaries.