How Can Small Businesses Combat Inflation
If you haven't read our previous post we suggest you do so before continuing.
In our previous article, we briefly address a few effects that an impending recession can have on small businesses and the pallet industry alike. What we didn't have a chance to discuss is one of the biggest drawbacks of a recession, inflation. In this article, we will address how pallet companies can combat some of the negative aspects of a recession.
First, what is inflation and what effect does it have?
According to bls.gov "Inflation is a general increase in the prices of goods and services in an economy". On the surface, it is a fairly straightforward idea to understand.
During a recession, inflation tends to skyrocket for short periods. This can create inefficiencies in a market. While it isn't an easy problem to immediately fix, generally, the rates are manageable for a well-organized company.
However, during this past year, we have seen a constant staggering increase. This past June alone, inflation raised to 9.1% the highest rate since 1981.
What does this mean for small businesses and more specifically pallet companies?
Sudden changes can act as a drag on productivity as well as affect a company's ability to budget long-term. Inflation also forces companies to shift resources away from managing products and services to combat losses and work on competitive pricing/hiring practices.
How can a company deal with the effects of inflation?
Now we have some beginning knowledge of what inflation can do. So what are some possible ways for pallet-selling companies to combat inflation?
Stocking up on supplies now.
With inflation affecting practically all parts of the pilot-making process, it is best to start gathering the necessary equipment and materials such as nails and lumber sooner than later. As prices are already reaching an all-time high, there is no sign of a decrease in the near future, from wood prices to employee wages, there are numerous expenses to count monthly. Not having to calculate or worry about the money that goes towards transportation or building materials can be a much-needed release.
Be considerate when changing prices.
As important as it is to make a profit, always consider the value. More than likely you'll have to raise prices. If this is the case it's best to raise them over time. This makes the product appear more reasonable. If you have a sudden spike you are a lot more likely to receive complaints and lose customers. However, it is also key to reflecting the true quality. If you are forced to cut back on the quality of your product then the price should reflect that. If customers are paying for high quality and receiving poorly made products, they will be inclined to find a supplier that is true to their word. In a time of competitive pricing and hiring, you do not have the security of people not having other options.
Having a strong customer base (with benefits)
With the fluctuation in competitive pricing, many consumers will begin to look for the best offers. This is where it's important to pay attention to your ideal customers. Offering small benefits can be a major influence in keeping customers who are more willing to recommend your company and advertise your services.
These are only a few possible ways to help combat the effects of inflation. With an impending recession, there's no doubt that many are feeling anxious. Unfortunately, there is no clear-cut solution. The best we can do is offer each other advice, collaborate, forecast, be proactive, and keep open communication. Let's be alert and work to keep the pallet industry strong.