This guide outlines the impact of higher US inflation rates across the small business fields.
Inflation rates are now slightly dropping, but the ripple effects of the steep rise are still felt by everyone. Click here to learn what it has meant for small businesses.
At its worst, the inflation rates in the US broke a 31-year record by rising by 8.5%. That meant that anyone who hadn’t had at least an 8.5% pay rise that year would have found themselves out of pocket. Small businesses, in particular, have felt the crunch – although, to the untrained consumer eye, it may just feel like brands are upping their prices in line with every other cost of living. That’s not the case. 67% of small businesses have reported needing to up the prices of products and services to cope with inflation rates themselves.
Impact of higher US inflation rates
Below, we’ll look at what the rising US inflation rates have meant for small businesses and how to survive what’s now a slowly declining rise in inflation rates.
Precise Money Management
Any robust business plan should have a precise money management plan that predicts and accounts for financial losses. There are tons of ways of managing money with more precision, including through the use of virtual business cards and fintech solutions that make tracking expenditures far easier, which is one of the key factors when outlining how to choose the best virtual credit card for your business.
Fintech solutions are the best way to have a more precise overview of what’s coming in and out and how to counteract inflation rates.
Increasing Prices, Decreasing Staffing
One of the ripple effects of the rising inflation rates is the need to increase prices – something consumers are feeling heavily in day-to-day living. Food and drink prices in the US, for example, have risen by 4.5%.
But these price increases won’t put more money in a small business’s pocket; it simply balances the books and prevents losses. Some 75% of small businesses report they’re feeling the pinch because of the rise in procurement of resources. Thus, product and price increases are essential.
Some small companies have also had to decrease their staffing levels to cut costs. It’s an unwanted ripple effect for companies that had to release staff due to the pandemic. Approximately four in ten businesses have decreased their staffing levels and looked for alternative financing options.
Beware – the Small Business Association products will soon hike up the prices of its products, so acquiring a business loan will soon be tricky.
Cutting Goods And Services
One of the most obvious ways to save money is to cut the supply of goods and services. Rather than bulk stocking, for some small businesses, it has become essential to cut the stock of goods and move to a demand and supply business model. The dropshipping business model is an excellent model for surviving inflation rates.
Small businesses won’t need to spend money on goods until the payment is made, and therefore the payment is made for the individual product, rather than bulk buying tons of goods and waiting for them to sell.
Conclusion
It’s not just small businesses that need to find solutions to survive the rising inflation rates – although the rates are slowly beginning to drop. All brands, big and small, and consumers are feeling the pinch. Government leaders expect the inflation rate to continue to drop, but it’s still essential for brands to find money-saving solutions in the interim.
