The US economy is experiencing astonishing inflation, and firms frequently have to choose between raising prices to keep up with cost increases and increasing the impact on consumers or internally reducing corporate margins to maintain market pricing for their clients. In a period of shaky economic conditions, neither of these two business growth solutions is recommended.
Consumers are being pinched for not only your product but also many other goods and services in these inflationary times. The ultimate test of your consumer base is hence the choice to raise your price. Are they going to stay or go? Is your product's or service's value proposition strong enough to withstand this price shock?
Alternately, considering the danger, you decide not to put pressure on your customers and instead consider reducing profits to support the firm. Your margins may become even more constrained as a result of rising labor costs from both within your own business and from all of the third parties you depend on. So you gradually start to reduce your safety net to protect yourself from further inflation. Then, as many businesses are already experiencing, you see a decline in consumer discretionary spending.
There don't seem to be any simple solutions to the problem of business adaptation in the current environment when faced with these conundrums. Companies must still act, though.
An example would be the recent trend of consumer spending-related businesses, like Stripe, a big payment processing firm, laying off 14% of its workers in anticipation of weaker company forecasts. They are neither the first nor the last. Other significant tech companies, like Apple and Amazon, have already announced hiring freezes, and this week, more followed as Meta, the parent company of Facebook, laid off 11,000 workers.
Whether you like it or not, inflation is a reality right now. How many? Nobody knows, but what we do know is that a business shouldn't watch from the sidelines;
Instead, you should have a strategy for how to overcome this issue and continue to grow.
One of the major blunders I've observed in companies during the COVID-19 era is the quick increase in business spending to match the quick increase in consumer spending. My company was planning for the downturn and automating to handle shifts in either direction while many were over predicting, spending, or hiring like crazy.
There are currently a variety of options available for any organization, but the following fundamental ideas should be taken into account:
Workflow improvement
One of the main reasons businesses employ so quickly is because they are unable to keep up with the growing consumer demand. For instance, increased revenue should result in improved customer support. No, not always. To determine when they can do without an employee, businesses must constantly seek to streamline their procedures.
Why do your customer support representatives respond to the same query over and over again? The time spent by your staff handling support tickets can be maximized by creating internal and customer-facing resource guides, which will also make it less necessary for customers to contact you in the first place. Guru Technologies, a tech company in Philadelphia, is an example of how to scale internal resources for your team quickly.
The customer experience should always be reviewed. Actually, that holds true for each and every aspect of your company. What duties carried out by your staff could be replaced by automation or more effective tools? It has been demonstrated that using tools like Retool and Zapier can speed up operations so your staff can concentrate on more difficult problems. Stop performing the same task manually repeatedly and try to streamline where you can.
Charge audits
There is no quick fix to anything. Avoid registering for every new piece of software available in the mistaken belief that it will help you optimize. An expense audit for your company must be performed on a regular basis. Do you find it challenging to keep track of all the streaming services you use on a regular basis that automatically bill you for?
It gets considerably more difficult to distinguish between expenses when a corporation is spending millions of dollars annually. Identifying who is using what and why might be difficult.
Auditing your expenses can help your employees understand and audit their own spending within the company as well as ensure that you are getting the right ROI.
As my employees become more capable of handling tasks that are more difficult, I can successfully give them raises. However, there is no justification for pay increases if someone is forced to perform manual tasks that require little to no effort or do not generate higher ROI. Your employees should develop along with you as you expand.
Debt reduction
From a business perspective, COVID has shown us that companies were not ready for a sudden fall. It's crucial to know what will happen if your company's sales decline by 10%, 20%, or more. How long can you keep going if your sales drop?
You can begin to build your options once you have a clear concept of how your model appears. Whether you intend to raise money or not, I believe you should constantly be considering your capital alternatives, which may include but are not limited to:
- Business credit line
- SBA lending
- HELOC
- Business alliances
Disclaimer: This is not financial advice because I am not a financial counselor.
Predicting inventory
If you sell consumer goods, over-ordering is another COVID-era lesson learned from previous businesses' errors. The supply chain sparked a great deal of anxiety in the retail sector.
And many stores placed excessive orders, acting as though there would be no potential decrease in sales. Retailers are dealing with massive stockpiles during the fall shopping season. According to The Washington Post, retailers are holding onto a record $732 billion worth of inventory because customers aren't buying it. I wonder why, hmm.
You can look at your model and understand what it would be like to adjust inventory forecasting to reflect a better ROI by having a focus on ROI, as I mentioned above.
Yes, stocking everything may increase your margins, but if you can drop ship and your margin decreases by 10%, you are now derisking and enabling your useful capital to go further.
Partnerships
Improving your partner relationships is frequently one of the business techniques that are most ignored. I always act with individuals in a way that I would like to be treated when conducting business with any other company.
And no, I'm not referring to politeness here. What if you always operated your business partnerships with the other party's best interests in mind?
You may quickly learn how to come up with innovative solutions for each other's problems by first conducting a straightforward study of your own company to identify its main challenges and strengths, and then doing the same for your business partners.
Conversations now evolve into collaboration rather than negotiations. I'll give you a concrete example rather than a general remark like another self-help book.
In my own company, we were aware that our partners were facing significant difficulties during COVID. Warehouses were having trouble with their supply chains due to a lack of employees. They couldn't even store or ship the extra inventory they needed to meet the high demand.
We knew we had enough extra room and by conducting our own internal strength/weakness analysis, we determined that what must go up must come down. Once the US's free money period expired, projecting inventory might become challenging (ie. stimulus checks, child tax credit, etc). What then did we do?
Although we were already on net terms, we devised a plan after realizing that we would be dealing with customers who needed their orders fulfilled immediately.
We experimented with consignment inventory and gave our top-tier merchants only as much room as they required for extra stock. In exchange, we were able to stock this as our own and increase the ability of our catalog to provide same-day fulfillment on more products.
The best part is that we kept the same terms structure we already had, but solely for the products we sold. We boosted our return while reducing the risk in our inventory forecasting plan and resolving issues with our business partner. a win-win situation.
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