Inflation Hits Your Profits

Inflation Hits Your Profits

When inflation hits your profits, all businesses need to review their costs, their prices and the structure of their business, or risk going backwards.

It’s in all the headlines – inflation at its highest for more than 30 years, and interest rates on the way up. Whether you’re in business or not, you’ll have already noticed it.

How inflation affects your business depends on what business you’re in. It’s already clear that construction has been hit hard, so has transport by fuel costs, and hospitality by food costs. Labour shortages make hiring difficult and expensive, and there are still some Covid-related supply chain issues being worked through. It’s all pushing on your costs.

Then there is the question of whether your margins are being reduced because you can’t raise prices as much as your costs are going up.

In the end, there are only so many things you can do. Simply put, you can:

  • raise prices
  • cut costs
  • reshape the products and services you offer to move to areas with less cost pressure
  • review and change your business practices, including automating or outsourcing
  • change supply methods or suppliers
  • look to equity investment in your business rather than debt
  • consolidate debts to reduce overall interest burden.

These are all pretty obvious – but putting them into practice can be difficult. It could require crunching some numbers about your expenses, or modelling the effect of price increases or debt reduction, or designing and planning cost-reducing computer systems.

Even communicating with your clients about price increases can be difficult, particularly for long term clients.

Inline can help with the analysis behind these decisions, so you’re not doing things blind. Contact us if you want to know more.

Leave a Comment

Your email address will not be published. Required fields are marked *