There’s no escaping the fact that inflation is surging. Consumer prices are skyrocketing in Dubai, rising faster than in Singapore, at an annualised rate of 7.1% in July. And dealing with inflation has become an important consideration for consumers and businesses alike. In our own business, we are doing a few things to combat inflation, aiming to insulate ourselves and our clients from rising costs.
Having explored this topic, we thought we’d share some of the most common ways that businesses can overcome inflation. These include:
- stocking up on supplies or inventory to hedge against further price increases
- monitoring their margins closely and raising prices when necessary
- cutting costs where it can be done sensibly
- increasing efficiency and becoming as productive as possible
- looking for additional revenue streams that might bring extra stability
- making marketing and customer acquisition a priority activity
Stock up now to hedge against inflation
This is one of the main ways we have chosen to respond to inflation, where it relates to print. The input costs we face in the print industry have risen dramatically, much like every other sector. Inflation in shipping rates has had a knock-on effect, raising the prices of UAE imports. In close collaboration with our printers, we have secured large paper stocks that should insulate our client from further price increases in the short term.
Many businesses can deal with inflation in a similar way. If your business requires materials to function, it might make sense to buy in larger quantities than you need right now. This will usually work out cheaper in the long run and protect your business from further inflationary price increases.
Monitor your margins closely
As inflation starts to eat into profits, businesses need to be extra vigilant about their margins. It’s crucial to have a good handle on your costs so you can make informed decisions about pricing. If inflation is starting to impact your business, take a close look at your accounts and make sure you are still making the profit you need to stay afloat.
When inflation is on the rise, businesses need to be proactive about raising their prices. This can be a difficult decision to make. Always talk to your customers in advance and keep them in the loop if you’re planning to raise prices.
Cut costs strategically
If inflation is impacting your business badly, you might need to look at ways to cut costs. But this needs to be done in a strategic way that doesn’t impact the quality of your product or service. One way to do this is by streamlining your supply chain and working with fewer suppliers. This can help you drive down costs and improve efficiency.
You might sacrifice some of the more expensive overheads. If you’ve got a snazzy office you could do without, consider moving to another location. The same goes for any unnecessary costs that are eating into your profits.
Become as productive and efficient as possible
In inflationary times, businesses need to be as productive and efficient as possible. This is the only way to maintain margins and keep prices low for customers.
This usually means investing in technology or automating processes. If you can find ways to do things faster and with less input, this will help your business stay ahead of the inflationary curve.
It might make sense to invest in new technology that can help your business run more smoothly. This could be anything from new software systems to new machinery. Consider anything that might help you produce your product or service more quickly. By making your business more productive and more profitable, you’re offsetting the effects of inflation.
Look for additional revenue streams
When inflation is starting to bite, it might be time to look for additional revenue streams. This can help to bring in extra money and stabilise your business. One way to do this is by diversifying your product range. This could involve adding new products or services that complement your existing offerings.
Another option is to start selling to new markets. This could involve exporting your product or service to another country. Or you might decide to target a new customer base at home. Either way, it’s important to look for new opportunities that can help inflation-proof your business.
Make marketing and customer acquisition a priority
Last and by no means least, marketing your business is hugely important in times of inflation.
The U.S. Chamber of Commerce reports that small business owners see higher levels of competition compared to six months ago. And you can bank on an increasingly competitive environment in GCC markets as inflation continues.
Customers have other options when it comes to buying the goods and services that you provide, and inflation means they are always open to reassessing them. If you want to succeed, you need to make marketing and customer acquisition a priority. This is the only way to ensure that your business continues to grow in spite of inflationary pressures.
There are always opportunities and inflationary pressures can sometimes create openings for those who are ready and waiting. Companies that invest in their marketing are better prepared for any eventuality. They are ready to battle competitors and weather the storm of inflation.
How will your business combat inflation?
Inflation can be a real problem for small businesses. As costs go up, it can be difficult to maintain the same level of profit margin. And if you don’t take steps to overcome inflation, it can eventually lead to your business failing.
A recent survey from Grant Thornton has shown that most businesses in the UAE have opted to pass the cost of surging inflation to consumers in a bid to protect their margins, but they have not taken any steps to deal with inflation over the long term.
Raising prices is one strategy to consider, but this isn’t a decision to take lightly. Inflation makes it all the more important that you retain customers and make every effort to foster customer loyalty. There are many ways to combat inflation, and we’ve looked at a few of them above. Marketing and building up your brand will remain as important as ever.