For the last 18 months, U.S. economic growth has been strong, but the hot business environment and a combination of global market conditions has spurred inflation at rates we haven’t seen since the early 1980s. According to the U.S. Chamber of Commerce, 85% of small business owners are concerned about the impact of inflation on their companies, and 67% have already raised prices in response. For franchisees and small business owners, inflation can hit like a tidal wave. But with careful planning and some effort, you can stay afloat until the waters recede.
We’re in a Perfect Storm for Inflation
In North America, we’re moving back toward normal life after the pandemic, and after two years of staying home, we’re ready to spend, which hikes demand for products and services. However, other parts of the globe are still grappling with COVID-19, which means the supply chain problems of the last two years will continue. For example, some regions in China are back under lockdown. And the Russian war against Ukraine, with its accompanying sanctions, have further clogged market channels. Surging demand combined with limited inventory in food, supplies, and fuel pushes up costs for businesses across every industry.
Also, in the U.S. and Canada, the post-pandemic labor market has tightened compared to previous years. Many people can’t go back to work because they’re caring for children, and some are still worried about getting sick. Accordingly, small businesses are paying higher wages and offering more benefits to attract workers.
Even though inflationary pressures are strong now, most analysts believe prices will not explode the way they did in the 1970s. Still, no one knows long the storm will rage. It’s likely we’ll see these conditions for the next year or so.
Inflation is Already Swamping Small Businesses and Franchises
As costs tick up, many businesses are looking for ways to shelter their margins by raising prices and cutting hours to control expenses. For example, with rising electricity costs, gyms are asking more for memberships. Retail stores are shortening shopping hours. And restaurants are finding some popular services, such as delivery, too expensive to provide without adding additional fees to cover fuel charges.
Some companies are simply offering less product for the same price to help customers avoid sticker shock. Domino’s Pizza, for example, has employed “shrinkflation” by selling smaller portions instead of raising prices. Some restaurants have eliminated larger sizes for items such as drinks and side dishes. And many packages on grocery and c-store shelves, from candy to pain relievers, contain less product for the same price.
Unfortunately, raising prices and shrinking sizes can discourage budget-sensitive customers whose dollar isn’t stretching as far as it used to. Grocery stores, for example, are already seeing shifts in consumer behavior; buyers are shopping around, dropping non-essential products, or opting for lower-cost options. And while cutting hours keeps labor and energy costs at bay, it keeps customers away, too. As a result, efforts to manage expenses may lower overall revenue as well, trapping businesses in a downward spiral.
Smart Business Strategies Help You Ride Out the Storm
As with any entrepreneurial challenge, savvy strategies help you stay profitable. Traditionally, companies fought inflation by delaying opening new locations or taking out loans with relatively low interest to bridge the cash flow gap. But there are other ways you can protect margin as well.
Optimize your product line.
Look at the sales performance of your products and services over the last few years. If any offerings aren’t selling well, drop them from inventory. Consider cutting out goods with low margins and focusing on popular, high-margin products. Grocery and c-stores, for example, may carry more essential merchandise and private label brands while scaling back high-end, specialty items. Restaurants can remove expensive choices from the menu and offer profitable meal deals at a competitive price, so diners feel they’re getting good value. And cannabis dispensaries may slim down inventory, eliminate less favored items, and minimize waste from expired product.
Some businesses take a different tack and offer premium brands or services which consumers expect to pay more for. Gyms, for example, might focus on selling personalized training plans or bundle nutritional supplements with memberships.
Improve employee efficiency.
Experts advise small businesses to find any way they can to increase productivity during inflationary times. With improved efficiency, each employee can do more, saving labor costs without having to cut services or hours. Look for ways to streamline procedures. Increase cross training so employees can cover for each other if needed. And adopt a digital checklist solution for better accountability.
With digital checklists, your employees take on more responsibility and independence. They have the guidance to complete work correctly and efficiently, minimizing wasted time and costly errors. The checklists help you protect your brand when it’s most crucial by ensuring work is completed according to standards.
The data from checklists also helps you improve training, coach individual performance, and reward excellence to keep engagement and loyalty strong and increase customer satisfaction. Customers will adjust more willingly to price increases if you consistently meet their expectations for service and quality.
Use MeazureUp’s Digital Checklist and Audit Solutions to Increase Efficiency and Accountability
With MeazureUp’s digital checklists and audit solutions, employees have mobile access to step-by-step instructions about what they need to accomplish and how to do it right. They’re less likely to make mistakes, and your managers can see updates instantly. The checklists help your team develop the independence and competence you need to stay successful in rough times. And the digital audits help you keep brand values strong.
Just a few of the benefits of MeazureUp in an inflationary spike:
- Streamline messy paper checklists and increase checklist completion rates.
- Improve district manager efficiency on site and off.
- Quickly catch, address, and follow-through on standards infractions before they become problems.
- Record all data for fast reporting and analysis.
- Help employees complete work faster and more accurately.
- Increase quality and consistency while lowering costs.
Learn how MeazureUp helps make your business resilient in the face of inflation.