6 Ways to Protect Your Small Business Against the Pressure of Inflation

The opinions expressed by entrepreneurs contributors are their own.

continues to soar, and from May 2021 to May 2022, the (CPI) increased by 8.6%. This is the largest increase the United States has seen since 1981. But the United States is not alone in facing rising inflation: 60% of advanced economies are there too faced.

For many, raising their prices is the natural reaction to inflation. And while this strategy may be necessary in some cases, it can also cause you to lose customers, especially if you do it too quickly. Let's look at six ways to protect your business from inflation and ensure it remains profitable.

Related: 4 Ways Startups Can Beat Inflation

1. Reduce expenses

One of the easiest ways to deal with inflation is to reduce your expenses as much as possible. In particular, take a look at your monthly service contracts to see if there's anything you can live without.

For example, are you paying for a coworking space that you no longer use? If so, you can probably reduce that expense. Of course, there will be necessary subscriptions that you cannot afford to give up. For these contracts, you can either negotiate the price with the supplier or see if you can find a cheaper alternative.

2. Prioritize cash flow

Cash flow is always crucial for small businesses, and lack of cash is the number one reason most businesses fail. Consistent cash flow helps your business run more smoothly by allowing you to pay your suppliers and invest in new opportunities.

And yet, cash flow is an area that many companies struggle with. To improve cash flow, look for ways to encourage your customers to pay for your business faster. You'll have to be flexible, of course, because they're also feeling the spike in inflation.

You can also consider offering discounts to customers who pay their bills early. And for larger products or services, you can start asking for an initial deposit.

Related: Here's How Small Businesses Can Survive the Post-Pandemic Economy

3. Reduce your supply chain risk

Your company's supply chain can be negatively affected when prices rise. A survey found that nearly half of small businesses have been affected by supply chain issues.

Companies that provide in-person services to customers are most at risk, such as contractors. However, companies are concerned about supply chain issues that lead to financial uncertainty across all sectors.

Here are some of the biggest problems you might encounter:

Increased hardware costs

Missing materials and delays

Increased shipping costs

The best way to reduce your supply chain risk is to diversify your products across multiple suppliers. If you're too dependent on one vendor, you'll have fewer options when it comes to price increases. But as you branch out, you have the opportunity to seek out alternative products and materials.

4. Automate what you can

Another way to deal with inflation is to leverage technology to automate as many repetitive tasks and processes as possible. Using technology doesn't have to be complicated: there are plenty of apps available to help you manage things like accounting, customers, and marketing.

By leveraging technology, you can accomplish more in your business while spending less, allowing you and your employees to focus on higher-level issues.

5. Focus on employee retention

You're not the only one feeling the effects of inflation. Your employees feel it too, as they pay more for everyday items. But as inflation rises...