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Inflation continues to be a concern across the United States. In June 2022, the annual inflation rate rose to 9.1 percent—a four-decade high. Although many consumers are expressing concern about rising costs, inflation doesn’t only hurt buyers. It also poses significant challenges for small businesses.

The costs of goods and supplies have risen, making it more costly to run a business. Additionally, buyers have tighter budgets, meaning they might be cutting back on their spending. These things pose financial risks that, if not managed, could spell disaster for your company. Fortunately, you have a few options. Try these tips to navigate periods of high inflation.

Cut overhead costs

The most obvious solution to combatting inflation is to reduce your business’s spending. Examine your budget and look closely at your expenses. Identify any areas where you can trim your spending or plug financial “leaks.”

Some strategies might include:

  • Cut back on nonessential supplies or services
  • Limit the amount of inventory you’re purchasing/storing
  • Search for less-expensive vendors or renegotiate with current ones

Maximize efficiency

Creativity and efficiency go a long way during periods of economic turbulence. Every business owner should ask themselves if there are ways to make their processes faster and less costly. Finding a new way to do things might be challenging, but it could pay off in the long run.

In some cases, maximizing efficiency could mean making some investments. Small businesses that are in a position for growth might benefit by investing in new automation and technology to improve productivity.

Raise prices

It can be tough to raise prices for your goods or services. Customers might not react well to higher costs. Unfortunately, this is sometimes the only option for business owners who are struggling with low profit margins.

It’s best not to create a sharp incline in prices right away. Develop a strategy focusing on the most important elements of your business. Identify products or services with the lowest margins and raise prices in those areas first. Conduct market research to make sure your prices are competitive with nearby businesses.

Price adjustments shouldn’t just be a once-every-few-years approach, either. In order to keep up with standard annual inflation, make a plan to reevaluate your prices once a year. This will prevent your small business from making large leaps in price seemingly overnight.

Make smart funding decisions

In many circumstances, you need to spend money to make money. If your business is feeling financial pressure, securing new sources of capital might help you overcome cash flow hurdles or make strategic investments during this time.

Small business loans are a possible option if you have been in business two years or more and can show a positive cashflow position. The Small Business Administration has specific criteria for loan applications for existing businesses (two years or more is one of those).

Alternatively, you can apply for a business line of credit that will provide short-term cash. This is a smart choice if you need to replenish higher-cost inventory or want to stock up on goods to secure lower prices now.

For a debt-free solution – which is also a fast solution – consider a Rollover as Business Startup (ROBS). A ROBS capital infusion can give your business the boost it needs to more securely weather the inflation storm. It’s also useful if you plan to reposition to meet new market needs and trends. In this instance you can use existing pre-tax retirement funds from a prior employer to “rollover” these funds into cash for any business expense and it never has to be repaid.

Tenet Financial Group offers a breadth of financial products to help small business owners launch, grow and stabilize their startups. Contact us today to learn more about ROBS, SBA loans and unsecured lines of credit.