According to the Bureau of Labor Statistics the consumer price index rose 6.8% from November 2020 to November 2021, which is the largest 12 month increase since June of 1982. It is hard to predict how high inflation is going to increase, however, most economists agree that inflation will continue to rise throughout 2022.
As prices continue to rise, it is important that business owners ask themselves how they plan on protecting their business from increasing costs? There are seven steps that entrepreneurs can take to start protecting themselves from increasing prices.
Put extra cash into interest accounts
Although this method will take time for you to see a benefit, due to higher interest rates you should see a larger payout on your interest-bearing assets. Make it a practice to start sweeping extra cash into interest bearing certificates of deposits, saving accounts, or bonds because you will see a difference in your earnings.
Refinance your debt
It has been forecasted that interest rates will continue to rise in 2022, so it is time for you to lock in on a lower interest rate to have more of the payment go to principal. Consider paying down your high interest credit card debt or refinancing your balances into a longer-term loan with a lower interest rate.
Shrinkflation is a practice that many big brands use. Essentially, businesses deliver slightly less of a product or service for the same price.
Lock in long term agreements
It can be very beneficial to lock in rates with your suppliers for a long term.
For example, if your landlord wants to keep you as a tenant, discuss with them the possibility of a longer-term lease agreement with fixed increases. This is also an option you can do with higher compensated employees. By securing these agreements, you will have a better handle on your cash requirements, and you will feel more in control.
Buy inventory, property, buy equipment
Due to increasing prices, it may be the time to buy items at a lower price so you can later sell at a higher one. You can begin investing in property and equipment which can help increase efficiencies so when prices increase you can be more profitable.
Invest in technology
If you would like to increase the amount of work that can be completed in a specific amount of time, consider investing in technology which can help you streamline your processes. For example, self-service kiosks for stores or investing in robotics in factories, can help better workflows.
Revisit your investments
Lastly, business owners should consider speaking with their financial advisors to see if it would make sense to make a shift in some of their investments. Obviously, this depends on your risk tolerance and income, however, if you are able to be riskier then you may have a better outcome in the end.
It is important to remember that the smartest business owners are always thinking ahead. Prepare for changes in the near future and make your moves early on so you can help your business grow.