Why inflation doesn't have to be a nightmare for small businesses

By Tonika Bruce, CEO of Lead Nicely, which helps startups, nonprofits, and executives win with unique and innovative marketing and sales strategies.

With preparation, businesses can survive and thrive in cycles of inflation. Although there is talk that 2023 is potentially a recession year - which poses some economic challenges for small and medium-sized businesses, such as declining sales, tight budgets and financing difficulties - we will not go into the politics and the philosophy of economics on what is causing it and how to stop it. Let's take a look at why inflation doesn't have to be a nightmare for small businesses.

Small Business and Inflation

Inflation has made everything expensive, rapidly reducing the purchasing power of customers, and for businesses, this is not good news.

Expert figures tell us there is progress, given the drop from 8.8% in mid-2022 to 7.1% by the end of the year. Projections are made for inflation to decline further to 6.6% by mid-2023. However, the fact remains that many business owners entered the year facing the same market conditions – an inflation rate much higher than the pre-pandemic 3.5%.

Rising costs for businesses often lead to higher prices for goods and services in order to save profit margins. In turn, consumers face increasing energy expenditures along with other essentials and may demand higher wages to maintain their lifestyles. This wage-price cycle can accelerate inflation. If wages fail to keep up with inflated prices, customers naturally reduce consumption, potentially worsening an already tricky situation for businesses.

It can be difficult to keep up with ever-changing market and industry trends, and sometimes it's necessary for small businesses to start over. However, my experience with starting businesses has shown me that small businesses are resilient. Most small business owners are entrepreneurial people who seek creative solutions to problems and are bold enough to take risks. As we see businesses fold in the face of economic hardship, many are pivoting and morphing into a whole new business or starting over.

stay competitive

While consumer spending falls during inflation, that doesn't mean people stop buying; they only become cautious about where they spend their money by focusing on products they consider essential. In this case, consider proactive pricing restructuring strategies to boost your sales. Here are some methods to consider.

• Sales may plummet, but customers will seek better value for money.

Inflation means