Inflation hits small businesses and tradespeople harder than most. In addition to the increasing cost of living, they must also cope with rising material and labour costs, which can affect cash flow.
Small businesses and tradies are still recovering from the COVID-19 lockdown disruptions and skills shortages, while inflation in Australia is the highest it has been since 2001 at 6.1 percent. When money is tight, homeowners might put off a renovation or even major repairs. When you combine this with rising material costs, it is easy to see how it can take a chunk out of profits. While these factors can’t be controlled, you can take proactive action to put your business in a steady position during inflation.
Even though inflation creates challenging times, there are ways you can offset the effects and improve your cash flow. Here are five steps you can take to help your business stay afloat during these challenging times.
1. Rethink your offerings
Now is the best time to review your products and services. You need to explore what has interest now and what has lost traction. Focus on what is currently selling with high profit, and you might want to think about revamping your current offerings. For instance, can you bundle services to save customers money on larger projects? Perhaps, it might be possible to break services up into smaller components to allow customers to customise their services by getting only what they need. Helping to continue bringing customers in the door, even if the jobs are smaller and more varied in nature.
2. Audit your supply chain
The next thing you need to do is to do a supply chain audit. Supply chain disruption can mean that you are unable to fulfil obligations to your clients. It is sometimes easy to get into the habit of ordering from the same suppliers, even if they raise prices. Now is the time to explore all your alternatives and try to find suppliers who are less expensive and reliable. Doing a supply chain audit can help you save money now and assure that you can deliver to your customers on time at affordable rates.
3. Audit your finances
If it has been some time since you did an audit of your operational costs, this is another task that can help your bottom line. You need to look for ways to save on everything from supplies to utilities. Conducting an advertising audit should also be a part of this process. Knowing which advertising channels are helping the most and which ones are not performing will help you streamline your marketing budget.
4. Invest in technology
Small businesses and trades tend to be the last to adopt technology to streamline their business. Finding technology bundles that allow you to consolidate and automate business processes will pay for itself in labour saved over time. This can help if your company is facing staffing shortages. It can also help your staff use their time more efficiently. When considering automation software, it is a good idea to consider your needs now and what you anticipate in the short and long-term future.
5. Retain valuable staff
Finding new employees is much more expensive than keeping the ones you have. The costs of recruiting and hiring new employees have more than doubled since last year, which makes staff retention one of the most important concerns. You need to focus on creating a work environment that fosters loyalty to the company. Make sure you are listening to what your employees have to say and focusing on creating a place where people want to come every day. Sometimes, giving current staff a small pay raise is less expensive than finding new employees, and it is worth it to treat your current employees well.
Bonus Tip
Now, you know a few practical ways your business can beat inflation. It is all about creating a balance between increasing revenues and lowering as many expenses as possible. One way to increase revenues is to list with a service, like Oneflare and Airtasker which have a customer base that is looking for services just like yours in your service area. By taking these steps, it is possible to survive and thrive, even in times of rampant inflation, and these are things you should put at the top of your list.