Inflation Tips for Startups – Top 11

The consumer price index in October 2022 will rise by 7.7% year-on-year. Prices for shelter, food and gasoline are ahead and we are all bearing the brunt. Inflation has all sorts of side effects for individuals and businesses, especially those that are just starting out.

Prices for most things you need to run your business are rising, and your profit margins can drop significantly. However, customers are also buying less, so the overall impact comes from both higher costs and lower sales.

In addition to inflation, a recession could also be on the horizon, causing consumers to cut spending even more. The good news is that your business can grow even in a recession. Here are our top 11 inflation tips for startups.

If you have to pay more for the goods you sell or for other business costs, you may have to pass those costs on to your customers. Therefore, you should analyze your profit margins to determine if you need to raise your prices.

If your costs start to outpace your earnings at the current price, you should raise your prices so you don’t lose money month after month. Even if you’re still making a small profit, you may need to raise your prices to ensure enough cash flow to keep the door open.

You have to walk a fine line. You need to protect your profits, but you don’t want your customers to stop buying because your prices are too high.

One tactic you can use is to increase your regular prices and offer a profitable sale or promotion while giving your customers the impression that you are making a deal.

How you manage prices during a recession depends on the nature of your business. As a startup, you are still trying to penetrate the market. So in the long run it may be worth taking some temporary losses until inflation is brought under control. That way you can continue to get new customers who will be with you in better times.

Manage cash flow

Having cash on hand during tough economic times is critical to being able to meet obligations. Remember, cash flow and sales are two different things. You can earn an income, but you don’t have enough cash to pay your expenses.

Managing cash flow effectively requires a few things.

• Accelerate cash inflow. If you’re a business-to-business seller, you’ve probably negotiated payment terms with your customers. For example, he may be paid 30-60 days after the date of purchase. If so, it’s time to revisit those terms to reduce the amount of time it takes for cash to arrive.Stay with industry standards while still billing fast and making payment times as short as possible. .
• Delay cash spending. On the other hand, you may have a similar transaction with your vendor, paying within a certain amount of time after purchase. Now is the time to renegotiate these terms so you can delay payments for as long as possible without incurring penalties.
• Manage your inventory. The inventory you have is the cash you don’t have in your hands. You need to find the optimal inventory levels to fulfill orders quickly, keep your customers happy, and not overstock your shelves. We recommend that you consider implementing a pull strategy instead of a push strategy.

The push strategy buys inventory and then tries to sell it. A pull strategy waits for orders to come in before buying inventory and fulfilling orders. If you can deliver orders in time using a pull strategy, you can avoid shelving inventory and have more cash in hand.

Analyze your costs

During difficult times, you need to look for ways to cut costs, so you need to analyze costs across all your operations. We are looking for items that can be reduced or eliminated. Let’s take a look at some costs here.

• process. Analyze all internal processes to find steps that can be skipped or tasks that can be automated. This can reduce labor costs and other resource usage.
• Credit card processing fees. You can negotiate a lower rate with your credit card processing company or shop at a lower rate. Credit card processing fees can be expensive, so lower fees can make a big difference.
• labor costs. No one wants to lay off their employees, but they can’t pay for work they don’t need. Find out what you’re paying people for and what you’re paying them to see if you can reduce or eliminate those costs.
• office expenses. Many companies are shrinking their offices these days, allowing many of their employees to work remotely. Consider whether this will work for your business, and if not, you can try to negotiate a lower rent. If you pay utility bills, you can also look for ways to reduce those costs.
• Prices for vendors and services. It may be time to shop around for cheaper vendors and service providers. You can try to bargain down the price first, but if you can’t, see if you can find a better deal.

Check all costs line by line. Overall, the small cost savings can add up to a significant amount.

Focus on customer retention

In times of inflation and recession, retaining customers is just as important as acquiring new ones. Here are some ways to do that.

• Interact with members of our loyalty program. Customers participating in a loyalty program are probably your best customers, so you can do things like offer them exclusive offers. You have their email address so you can send them promotions or just “keep in touch” messages.
• If you don’t have a loyalty program, start one. Easily find software to create a loyalty program customized for your business. Many businesses use loyalty programs for good reason. In other words, it works by extending the loyalty life cycle. This means your customers will remain loyal to your brand for a long time.
• Ask for feedback. Customers want to know that you care about their experience with your brand. We use text or email surveys to solicit feedback from our customers and use that information to improve our products and services and customer support. You need to give your customers the best possible buying experience.
• Make your purchase easy. If you sell online, use customer accounts to simplify the purchasing process. We store your payment and shipping information in your account, so there is very little information to enter.
• Personalize the customer experience. Again, if you sell online, personalize your customer’s experience by using data and automation to recommend products based on past purchases.

bundled products

If you sell multiple products, consider bundling related products into a package deal. For example, if you sell clothing, he bundles three items together as one outfit, giving you a small discount off the price you pay for each item individually. This will increase your average sales and generate more revenue. Depending on the nature of your business, you can get creative with this, but the key is to make your product packaging look like a good deal.

Promote profitable products

I think some products have higher profit margins than others. In that case, you can make a profit even if you discount the product with a high profit margin. Execute aggressive promotion of profitable items on store signage, emails, and other marketing strategies. You can do more for your customers while increasing revenue and profit at the same time.

Diversification of products

If you currently offer only a few products, but have the resources to produce others, consider adding a new product line unrelated to what you currently offer. This allows you to open up new markets for your customers and diversify your sales possibilities. For example, if you sell a product that you may not need during a recession, offer a recession- and inflation-proof product.

If the nature of your business allows, you can find something you can offer as a subscription service to add new recurring revenue streams. For example, if you own an auto repair shop, offer a subscription that your customers pay monthly to get a free oil change every three to six months. Even if your customers skip oil changes, you still make money.

adjust marketing

Financial issues can be used to increase brand credibility. You can tailor your marketing to send a message of empathy to your customers by saying “I want to help you” or “I care”. Combining this marketing with profitable product promotion allows you to leverage two strategies at the same time.

You should also adjust your marketing strategy to use free or low-cost marketing techniques. Spend time, not money, on social media marketing and email marketing. Put together a budget and an overall strategy to keep the brand and his image in front of customers without breaking the bank.

get a line of credit

If price increases have a significant negative impact on sales, consider holding prices where they are and using credit lines to keep the door open until the economy picks up and prices normalize. We recommend that you consider it. That way, you can keep your customers and meet your obligations.

If cash flow is low, the line of credit can be used to pay for vendors, rent, or other expenses.

Just be careful. Credit lines are intended as a short-term cash flow solution, so use them sparingly and pay off as soon as possible.

Roll out the red carpet for new customers

Hopefully we still have new customers coming. Whether you sell online or in person, new customers need to have a great and memorable experience with your company. One great option is to offer a discount on your next purchase from your business.

You also need to maximize the value from each new customer. Get them to sign up for your loyalty program and recommend products like product bundles and high-profit items.

You also want to get information from them so that you can improve your marketing, not just keep in touch with them. At least find out how they found you and that email address. Please give me.

build a partnership

Companies often partner with other companies that offer complementary products to share marketing and sales resources. For example, if you sell clothing, you can partner with a jewelry company to create a marketing campaign. This allows you to sell your product at half the cost.

Also, customers may see more value in your offering when considered in combination with another product. For example, “That dress looked great with that necklace.”・It will be a win-win situation. You and another company do the sales and your customers get amazing costumes!

at the end

Times of inflation are tough on everyone, but smart business owners can weather the storm and sometimes even thrive. You need a strategy that takes advantage of some or all of the tips you’ve mentioned. What you can do depends on the nature of your startup business, so consider how these tips can help you. Be creative and think outside the box.

Also, always remember that the economy will inevitably go up and down. So do your best to get through the bad times. They will pass and grow stronger to weather the storm.

The article, Inflation Tips for Startups – Top 11, first appeared on Due.