Inflation has reared its ugly head over the last couple of years, and while it seems to have settled down a bit in 2023, forecasters are predicting 2024 will be a wild ride.

Inflation reduces the purchasing power of your money; you pay more and get less. The impact can be severe, affecting supply chain, cash flow, and profit margins.

Costs of raw materials, supplies, and utilities are rising faster than you can increase prices. Employees want higher wages to handle their own inflation woes. The cost of borrowing keeps rising, making it difficult to finance investments in the business.

And consumers tend to spend less during times of increasing inflation.

How can you adapt your business and thrive during these crazy times?

1. Employee retention is key. There is a labor shortage, and good people are hard to find. The cost of replacing employees is much higher than many employers realize; in some cases, the cost can be as much as 100% of an employee’s annual salary. Employees want higher wages since they are facing their own inflationary problems. But there are other ways to retain good employees outside of increasing wages; you can offer flexible work hours or additional paid time off. You can also think of simple things to increase morale, like bringing in lunch once a week.
2. Look for local suppliers if you are experiencing supply chain backups. Try to diversify the number of suppliers you use and compare their pricing regularly.
3. Review processes and look for ways to streamline and improve efficiency. Encourage feedback from employees, especially those who are most productive.
4. Manage your inventory. While it is comforting to have a stockpile when your supply chain is still experiencing holdups, the cost of carrying too much inventory is high. Not only does it mean cash out of your business, but there is also the cost of warehousing and managing the inventory. You also run the risk of obsolescence.
5. Review your pricing strategies. Raising prices must be carefully evaluated in terms of competitors’ pricing, strength of your customer base, and perceived value. Look for ways to increase the perceived value of your products/services to offset the effect of the increased prices.
6. Update your marketing and advertising strategies. Look at advertising methods you have not used in the past and evaluate if they might be worth a try.