Originally published on newstrail.com.
Inflation is typically spoken about negatively, and while that’s mostly true, it also provides opportunities for small businesses. According to the CEO of Everest Business Funding, Scott Crockett, there are dangers small businesses need to avoid concerning inflation if they want to take advantage of these opportunities that might present themselves.
Below, he discusses some ways you can inflation-proof your small business so that you can always be ready to pounce when the opportunity arises.
Understand Your Cash Flow
One of the best ways to inflation-proof your business is to always be on top of your cash flow. You need to constantly know how much money you’re bringing in and compare it to how much money is flowing out the door so that you have a real-time look at your company’s financial health.
When inflation hits, your receivables will likely be affected, at least in some way. By having a good handle on the cash flow from the get-go, you’ll be able to understand what levers you can pull to make impactful changes to help you stay afloat.
Analyze How You Might Be Affected
Inflation doesn’t affect every business in the same way. Some businesses will experience an extreme increase in expenses due to their core raw materials increasing in cost. Others may only see a mild increase in product-related costs but a significant bump in other areas.
If you want to be able to plan for an inflationary environment and protect against its negative effects, you will need to know in which areas your business will be affected the most.
Conduct a thorough analysis of what these areas might be and what steps you could take to offset these increases in expenses.
Create Value for Customers
Consumers often cut back on their spending in inflationary times because they have to. Their income likely won’t go up, but their day-to-day costs will.
The first place consumers will look to cut their spending is on anything they don’t feel is necessary or brings extreme value to their lives. So, an effective strategy to inflation-proof your small business is to create value for customers.
If consumers believe that they simply have to have your product or service, they will purchase it regardless of the economic environment.
Know Pricing Power
Scott Crockett advises small business owners to learn more about pricing power. It’s a concept in marketing that states you can determine what the impact of a price change could have on the demand for your products or services.
Many businesses will increase the price of their products or services during inflationary times to offset their own costs. Yet, many don’t know what the impact on the demand for their products or services will be based on that increase in price.
The goal is to be able to increase prices without affecting demand. You can only do that properly, though, if you understand what the pricing power is for your products or services.
About Scott Crockett
Scott Crockett is the founder and CEO of Everest Business Funding. He is a seasoned professional with 20 years of experience in the finance industry. Mr. Crockett’s track record includes raising more than $250 million in capital and creating thousands of jobs. Scott has founded, built, and managed several finance companies in the consumer and commercial finance sectors.