How To Survive Inflation As A Consultant

Octavia Conner

By Octavia Conner

Tags: All, Strategy

Forbes defines inflation as a rise in prices and a decline in your currency's purchasing power.

Therefore if you feel your dollar is not returning the same results as before, you are correct! The effect of inflation on small to medium-sized businesses means that businesses will sell less, resulting in a decrease in cash flow and lower profits.

 

Decreased cash flow and lower profits mean reduced ability to grow or invest in the business.

So, as a small business owner, how do you survive inflation? In this episode, I will provide you with a few key strategies that will position you to not only survive but thrive during inflation.

 

 

 

 

According to the National Federation of Independent Business (NFIB), inflation is causing America's entrepreneurs more anxiety than any other business problem. 

 

Honestly, the effect of inflation on your business can be detrimental if you are not prepared and cannot pivot properly while staying in alignment with the vision for your company. 

 

The Effect Of Inflation on a Small Business

 

Due to inflation, most of your clients are closely guarding every dollar because their lives are getting more expensive. Inflation is also causing supply chains to have limited resources. Internal consequences of inflation could be your staff resigning or demanding a salary increase because of gas prices and their cost of living is increasing. 

 

According to USA Today, over the last 40 years, we are currently experiencing the highest inflation rate, surging towards 8.5% with no decrease in sight. Wow!!

 

With inflation rates this high, what should a business owner do to survive? Well, grab your note-taking device, and let's get into it. 

 

Look For Ways To Cut Costs 

 

Review overhead costs such as marketing, subscriptions, and other general admin expenses and identify if these costs are really needed to operate your business.

 

Complete this step by pulling your profit and loss statement by % of income.

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This report will display how much of your income is going to cover each expense line item.  

 

Outside of the salary expense, most of your expenses should be lower than 10%. The first costs to examine are those above 10%. 

 

Once you identify those, determine their ROI and identify if your business can thrive without them. If so, reduce or eliminate those expenses. As a result, you will keep more money in your business to begin to build a cash reserve. 

 

Maintain a 60% or Greater Gross Profit Margin

 

Your gross profit margin shows the percentage of revenue you keep for each sale after all costs are deducted. It indicates how successful your company generates revenue while keeping its cost of goods or services low.

 

The formula is (Net Sales - COGS/Net Sales). 

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A good metric for gross profit margin is 60% or higher. You are operating on dangerous grounds if your gross profit margin is lower than 60%. 

 

To improve your gross profit margin, you need to increase your prices, sell more and decrease your direct cost. 

 

 

Keep Your Employees Happy

 

As I mentioned previously, inflation is causing many employees to desire and need more income. If you noticed a decrease in attentiveness and morale amongst your team, it could be the stressors of a higher living expense.

 

As a business owner, you can help your team and help yourself by finding out what perks, benefits, incentives, and schedules they desire. 

 

Losing staff could mean your inability to meet customers' demands. Therefore your goal is to keep your team happy and showing up, and as a result, your customers will also be happy. 

 

Invest in Automation and Technology

 

In today's time, technology can be a game-changer for your cash flow and bottom line! Implementing automation and technology will help you improve services, reduce delivery time, streamline operations and reduce costs.

 

I recommend examining every moving part of your business and identifying where you can implement technology and automation. 

 

Raise Prices 

 

The best method to counterpunch inflation is to pass the higher costs you are experiencing to your customers. 

 

When you raise your prices, instead of selling several service offerings or packages, you may only need to sell a few to generate a profit and maintain positive cash flow. 

 

As a business owner, you must be able to adapt to the ever-changing environment. A solid financial plan is critical to surviving and thriving during inflation and other business changes. 

 

If you are in need of a plan, download our FREE Say Yes To Profits Plan today! This plan will help you gain financial clarity and control and position you to wise business growth decisions so that you say yes to profits.

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