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 that investments like real estate, commodities, and stocks increase in value.
Businesses can get ahead of their competition when they make the right moves.
This business blog post looks at inflation and how to get ahead.
What Is Inflation?
Let’s start with a basic overview of inflation and how it impacts consumers and businesses.
Inflation measures the rising cost of goods and services, i.e. the purchasing power of a currency. Many factors cause inflation including:
- Supply and demand
- 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 determines what they buy and may avoid altogether. The same applies to businesses; they, too, will be focused on how they are spending their budgets to prevent debt they can not repay.
However, consumers need essential services and goods, and price controls do not protect many. 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. Things are considered essential items, including:
- Coffee, sugar
- Crude oil, gas, biofuels
- 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.
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.
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?
For businesses, adopt the glass-half-complete 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
Cost-cutting is always a valuable tool for improving the bottom line. Look where you can cut off fat, i.e., outgoings that are a liability, not an investment.
Ask all service providers for a better deal.
Remember, your service providers need to survive, too, so when you ask them for a better deal, it could be that you ask them to absorb the rate of inflation rise this year so the cost of their service to your business doesn’t go up for twelve months.
Your staff is an investment; however, maybe you have more employees than your business can afford. Trim the payroll by using freelancers for projects.
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 important 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 good for your company to exploit opportunities while competitors are distracted.
All businesses are hurting to some extent. Find your strengths and work on them. You may think spending money now is risky, but doing nothing is more difficult.
Hone your offerings to attract new audiences.
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 by offering great deals, loyalty and referrer programs, and free stuff.
Use abandoned cart emails to pull customers back to their shopping cart to complete their purchases. Remember to offer a discount on their investment 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 has a few must-do strategies, including:
All marketing needs high-quality content, including text, images, and videos. Websites and landing pages must be cohesive in delivering a consistent message.
Use the best agency you can afford. Leverage their knowledge of competitors in your industry and skills to get campaigns that pull customers to your business.
Times may get more challenging for businesses and consumers in the foreseeable future. Therefore now is the time to act smarter and prepare for the worst outcome while visualizing 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.