Inflation can increase the cost of goods sold which can negatively impact businesses. Even with the power to increase the cost of your goods or services, inflation can impact your business.. As costs increase, your bottom line can take a hit and your cash flow can be interrupted. Additionally, borrowing money can become more expensive as interest rates can rise with inflation.
By taking a proactive approach though, there are ways your business can combat inflation. Keep reading to learn more.
What is inflation?
Prices rise on a regular basis, which is known as inflation. Inflation is typically expressed as a percent at which goods and services increase in cost over time. Some may view inflation as a positive while others may view it as a negative. What we can say about inflation is it’s unavoidable for business owners. As a business owner, you should always prepare for prices to fluctuate to some degree, up or down. When it comes to combating inflation in terms of interest rates and borrowing money, the cost of borrowing is an ongoing challenge. For CPG (consumer packaged goods) brands keeping up with demand can impact cash flow. With inflation, the challenge may be even more difficult. At Kickfurther we help CPG brands access affordable inventory funding to combat inflation.
How does inflation impact businesses?
Inflation impacts personal and business finances. When every aspect of doing business increases, changes will need to be made to adapt. Beyond that though, inflation increases the cost of living for consumers which can also impact businesses.
The point – inflation impacts more than just the bottom line for businesses. It affects every aspect of a business.
The good news is that with a little bit of creativity and a desire to maintain a successful business, you can combat inflation.
What are some specific things businesses can do to combat inflation?
As a business owner, creating a plan, and revising it frequently, can help you combat inflation. Nothing is ever perfect, but ignoring reality is not a solution. Operating a business takes a lot of work as does making educated decisions. Combating inflation means protecting your bottom line, which is critical to success. Here are some ways business owners can work to combat inflation.
- Strengthen your supply chain: As we mentioned, inflation will impact all areas of every business. As you work to combat inflation, you’ll need to prioritize keeping enough inventory in stock so that sales don’t unnecessarily suffer. You may also need to change how much inventory you stock as sales can shift. Whether you manufacture products on your own or outsource, strengthening your supply chain will be critical as you navigate inflation. Work with suppliers to find solutions that benefit the both of you. Take their pulse on their financial health. Afterall, you rely on them for inventory. While inflation can be devastating for businesses operating the right way it should not lead to failure. If you are manufacturing products, find ways to improve efficiency and keep costs down. As you try to protect your bottom line, you’ll need to analyze all activities contributing to it, many of which will be in the supply chain.
- Be strategic in your pricing: Pricing products right is key at all times, but especially when prices are rising. Invest time into surveying and analyzing as much data as you can to determine what the market can bear. You will likely need to raise prices but you won’t want to raise them so much that you lose sales. Find the happy medium that allows your business to thrive while keeping customers happy and coming back. For products that are purchased on a regular basis, some customers may not notice a small price increase, but a little extra from every sale can add up. The good thing about pricing is you can always change it in the event you make a mistake.
- Streamline your offerings: Efficiency is key when it comes to keeping costs down and beefing up the bottom line. Simplifying your portfolio is a great way to lower costs. If you offer three similar products, ask yourself if there’s a way to combine them into one while still meeting all needs of the customer. Streamlining offers can improve the bottom line in many ways from simpler fulfillment to bulk order discounts. When inflation occurs, making adjustments to keep a closer eye on costs will be critical. By streamlining, you can do just that.
- Stockpile inventory to ensure stability: As prices rise, the cost of your inventory may rise too. While we usually always encourage business owners to only stock as much inventory as they need, this could be an exception. Stockpiling inventory can help you acquire it at a lower cost. It can help you ride the inflation wave until you have a more defined plan. However, it can also tie up working capital.
- Negotiate with suppliers: You are not the only one suffering from inflation. While negotiating is always important, you want to ensure suppliers have healthy operations as you need the partnership. Be honest when negotiating, especially during trying times. Find ways you can both benefit.
What are the risks of not combating inflation?
Ultimately, if business financials are not healthy, the end will come sooner than later. While we are talking about inflation here, it’s always important to keep costs as low as possible, without taking any shortcuts. It’s also important to price products competitively so you capture as many sales as possible. If you choose to ignore inflation and wait for it to pass, that could be a huge, costly mistake. While you may make some temporary adjustments to see how things sort out, you should always be planning long term as a business owner. Playing devil’s advocate is a good thing, but we strongly urge business owners to not ignore inflation.
How Kickfurther can help
Kickfurther connects CPG brands to our community of backers that can provide working capital. At Kickfurther you can get inventory now and pay later, so you can combat inflation while improving the bottom line. Our unique funding model highlights the following. . .
- No immediate repayments. You control repayment. Don’t pay until your product sells.
- Non-dilutive. Maintain equity in your business, we know how hard you worked for it. We are here to work with you, not against you.
- Not a debt. Because you have enough financial strain, this is not a loan.
- Upfront capital. Pay suppliers faster with upfront capital, there when you need it!
Closing thoughts
In our current economic state, inflation is a real challenge for business owners. Finding ways to combat inflation while preserving quality and value for customers can be accomplished. Through educated business decisions and careful planning, you can combat inflation. For affordable working capital solutions, lean on our platform. We’re here to help – and we mean it.
