Over the past two years, you have had many hurdles to jump through due to the challenges faced by the pandemic. Unfortunately, there seems to be one more challenge you will need to face; inflation.
As we have seen, inflation has caused prices to increase at a fast rate which is why it is essential to understand how to offset the damages that inflation and high-interest rates can cause.
Analyze Fixed Costs
One step that can be taken to offset inflation is simply analyzing your fixed costs to see if these can be reduced. Some examples of fixed costs are rent, insurance, and utility bills. Expenses such as water, phone, gas, electricity, and internet connection may be decreased if you were to take action.
For example, you could look at more affordable phone plans that are available or power down machines you are not using in order to reduce your electric bill.
Another recommendation is to review potential new employees’ salaries prior to hiring. Salaries are a fixed cost that you may be able to adjust in order to help save money. If you were to hire an individual who has a high salary, this will negatively impact your fixed costs. In other words, if an economic downturn were to strike, you may not be able to sustain the new hire’s wage.
You might consider hiring staff on an hourly basis so they are only paid for time worked rather than a salary. At some point when they have proven their value, you can switch to a salary, if desired.
Have an Online Presence
You can also save money by ensuring that your small business has a strong online presence. By solidifying yourself in the digital realm, you will be able to save money on advertising and use these extra funds for emergencies.
Think about creating a strategy for your business and sticking to it to avoid having to outsource marketing. Although there are some items you may have to outside help such as creating your logo or graphic design, it is important to remember that you can be successful marketing your business on your own.
Have Cash Reserves
Lastly, another way to ensure your business’ success during high inflation is by having at least 12 to 18 months of cash reserves available at any time. If your business starts to struggle financially, you will have an emergency fund available during these hard times. Besides this, do your best to get your business credit score and history in good shape. This will help you to qualify for a better loan if money were to become an issue.
Although the challenges of the pandemic continue, you can prevent financial loss by taking the above steps and precautions. Don’t be afraid to take some extra time to create a financial game plan for your business that will help you identify ways that you can save funds so that your company can remain successful even during high inflation.