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How Businesses Can Meet The Challenge of Inflation

inflation

Is inflation your enemy or your friend? For businesses and consumers, it can be both good and bad. Inflation hurts as it erodes the purchasing power of goods and services. However, the flipside to inflation is investments like real estate, commodities, and stocks go up in value.

Plus, businesses can get ahead of their competition when they make the right moves.

In this business blog post, we look at inflation and how to get ahead of it.

What Is Inflation?

Let’s start with a basic overview of inflation and how it impacts consumers and businesses.

Inflation is the measure of the rising cost of goods and services i.e. the purchasing power of a currency. There are many factors that cause inflation including:

  • Supply and demand
  • Income
  • Production costs
  • Monetary policies

When demand goes up or supply goes down, prices are higher. Consumers buy more when prices go down and less when prices go up.

For most spending consumers, income ultimately determines what they buy and what they may avoid altogether. The same applies to businesses, they too will be focused on how they are spending their budgets to avoid debt they can not repay.

However, consumers need essential services and goods, and many are not protected by price controls. Remember the run on the petrol filling stations in the UK? Petrol prices have steadily risen, and consumers are paying more at the pump. Supply constraints persist. Low volumes have forced filling stations to increase prices to cover the costs of providing fuel to consumers.

Governments control inflation with monetary policies managed by central banks like the USA’s Federal Reserve and the UK’s Bank of England.

How Can Consumers Hedge Against Inflation?

Savings are eroded with inflation and this can affect retirement plans. However, there are investment options that can ensure consumers money is working harder and not going backwards when inflation hits.

Commodities, Real Estate, Alternative Investments

Investing in commodities is a recommended strategy in this article. Commodities are considered essential items including:

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  • Coffee, sugar
  • Crude oil, gas, bio fuels
  • Corn,soybeans, wheat
  • Beef, agricultural products
  • Silver, gold, copper
  • Cotton, wool

Protecting investments from inflation is essential, and it’s why real estate is also a top asset for ROI. Hyperinflation in real estate has been evident in most nations since COVID-19, with price increases of 30% and more attracting more investor money.

Alternative investments like cryptocurrencies are viewed as a good hedge against inflation. Why? Well, unlike fiat money, there is a cap on their supply.

Income

Increase your income. Seek opportunities to earn more. Start a side hustle or maybe take on overtime with your employer. Invest in income-producing assets like real estate or shares.

Lifestyle

Consider lifestyle changes from diet and dining habits to activities. Start a veggie garden, take up cycling and ditch the memberships you’re not using.

How Can Businesses Get Ahead Of Inflation?

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For businesses adopt the glass half full approach to protecting your company from the impact of inflation. Some of the steps include:

  • Managing overheads
  • Improving operational efficiency
  • Investing in services or product upgrades
  • Marketing

Reduce Costs

Cost-cutting is always a valuable tool for improving the bottom line. Look at where you can cut off some fat, i.e. outgoings that are a liability, not an investment.
Ask all service providers for a better deal.
Your staff are an investment; however, maybe you have more employees than your business can afford. Trim the payroll by using freelancers for projects.

Operational Efficiency

The time is now to use cloud-based computing for cost savings, operational efficiency and better productivity. Your remote workers can work together on projects, and teams can catch up on updates and stay connected to the more significant goal – getting the job done!

Use VoIP, collaboration tools for unified communications.

Do you need that ample workspace? Encourage more staff to work from home full time and downsize your workspace.

An audit of your outgoings will identify where you can reduce expenses.

Plus, cost-cutting is not your only tool to meet the challenge of rising costs.

Invest and Spend

Spending is also a good move for your company to take advantage of opportunities while competitors are distracted.

All businesses are hurting to some extent. Find your strengths and work them. You may think it’s risky spending money at this time, but it’s riskier to do nothing.

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Hone your offerings to attract new audiences.

Marketing

Investing in marketing and advertising initiatives will help your business grab market share when consumers are more discerning with their purchases.

Businesses aware of changes in consumer sentiment will take action with offer great deals, loyalty and referrer programs and free stuff.

Transactional emails

Use abandoned cart emails to pull customers back to their shopping cart to complete their purchases. Remember to offer a discount on their purchase to improve your conversion rate. Plus, use other transactional emails and email marketing campaigns to stay in the minds of everyone on your email marketing list.

Digital Marketing

Digital marketing has a few must-do strategies including:

PPC Advertising
SMM Social Media Marketing
Influencer marketing
SEO and SEM

All marketing needs high-quality content, including text, images, videos. Websites and landing pages must be cohesive in delivering a consistent message.

Use the best agency you can afford. Leverage off their knowledge of competitors in your industry and skills to get campaigns that pull customers to your business.

Summary

Times may get a lot tougher for businesses and consumers alike. Now is the time to act smarter and prepare for the worst outcome while visualising the best. Make your money work for you, use proven strategies to reduce overheads, improve systems and invest in your team and offerings to hedge against inflation.

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