How Businesses Can Proactively Respond to Inflation and Economic Uncertainty
August 10, 2022
This article was originally published on March 15, 2022 and republished on August 10, 2022.
Inflation, rising gas prices, and global unrest continue to dominate the news. Economic uncertainty continues to grow, and the impact of these concerns runs deep, affecting individuals, families, and businesses alike. In fact, more than two-thirds of small businesses reported higher than average selling prices and more than a quarter say inflation is their biggest concern, according to US News & World Report. But it isn’t just small businesses that are feeling the impact of inflation, supply chain issues, and global unrest; these issues are top of mind for businesses of all sizes and across industries.
So what can businesses do in the face of so much uncertainty?
Plan, plan, and plan some more.
The disruptions caused by the pandemic have prepared us for dealing with uncertainty. We can use the tools we learned over the past two years to handle the current challenges and uncertainty. Businesses should approach spending in the same way we approach household expenses – by being proactive about making do with less.
Rather than avoiding hard conversations, businesses should be having the same conversations many people are having at home about ways to save money and prepare for what’s to come. Here are a few suggestions:
- Take a careful look at expenses. Are there areas where your business can cut back temporarily? Can you put off some planned expenditures for a while? Are there non-essential expenses that can be minimized? Take your role as a careful steward of your resources very seriously.
- Ramp up debt repayment, when possible. With interest rates expected to rise, now is a good time to pay down debt if possible.
- Assess supply agreements. Are there rolling forecasts or minimum purchase requirements that could be impacted by rising transportation prices and limited inventory? If so, consider being proactive about communicating concerns with contract partners. Depending on where your suppliers are located in the world, you may need to anticipate additional delays due to scarcity of supplies and rising gas prices.
- Adjust expectations on raising money. Because options may be more limited, you may want to consider alternatives for raising capital.
- Have hard conversations within leadership and management. These are big issues and difficult decisions with potentially long-term ramifications. Don’t put off having these hard conversations with leadership and company management. The better prepared you are now, the better equipped you will be to weather any storms.