In today’s economy, it becomes extremely vital for businesses to be in a position to adjust to the ever-changing market. Kavan Choksi points out that no matter what type of a business one runs, there is a good chance that they might have to deal with struggles associated with inflation. Hence, all business owners must be proactive about preparing for inflation and know how to deal with it.
Kavan Choksi briefly discusses how a business can handle inflation related struggles
Inflation implies to the continuous and accelerating rise of prices of goods and services. It occurs when the supply of money increases faster than economic growth. Inflation is measured as the percentage rate at which prices for consumer goods rise every month. When the market is hit by inflation, one is likely to see prices for goods in a given year double in the subsequent year. Inflation is among the most common challenges faced by modern businesses. If it is not properly managed, inflation can lead to reduced profits for a business and even cause bankruptcy.
Here are a few tips that can help a business to deal with inflation:
- Review pricing regularly: Inflation might cause prices for raw materials and other inputs to increase. This can in turn eat into the profit margins of a business owner. To offset this, business owners must review their prices regularly and see to it that they are still in line with their expenses. If required, the business owner may adjust the prices upwards to ensure that they are still making adequate profits. Regularly reviewing prices is pretty important as inflation may often creep into an area where it’s not expected.
- Use cost-cutting measures: If a situation calls for cost cutting measures, one should try to do whatever they can to reduce their overhead costs. Swift and smart decision making is vital in any business, especially when it comes to expenses. If the cost cutting methods followed by a business are not effective enough, one would have to look for new approaches and methods. Business owners may choose to downsize their operations and relocate, consider selling to other distributors or suppliers, and make sure that they are doing everything they can to keep expenses in check. One might not be able to compete on price but they may offer other added value that the customers are willing to pay for.
- Increase efficiency: A business should become more productive and efficient to offset the cost of inflation. This can be done by using the appropriate tools, streamlining business processes and training the staff. By becoming more efficient, one might be able to reduce costs and still get the same quality of output. Advanced technology can especially help in improving business efficiency. The key is to identify the weakest aspect of a business, and then seek out a digital solution that solves the problem.
As Kavan Choksi mentions, in addition to the factors discussed in the above mentioned points, a business must also put emphasis on diversifying its revenue streams. This will help business owners to make sure that if one area of their business ceases to be profitable, the others can make up for it.