So we are in the middle of February 2022 and the inflation keeps creating a lot of issues for small and medium sized business owners.
We have been contacted by many of our clients in the past 5 months time regarding the inflation issue in every single business.
We have clients who are working in the industrial production side of things who have seen their electricity bill go up 300% in this short period of time.
They have also seen their raw material prices go up 200% in the same period of time.
How do you as a business owner deal with this?.
So for the production and the industrial side you need to sit down with your customers and explain this situation to them.
What makes this sometimes difficult is that many production companies have singed agreements that they can only raise the price 5-10% per year no matter what!.
Then the only option is to either eat the cost in the business and hope for a deflation coming your way next year.
Or simply stop producing the products if you are forced to sell on a loss.
The issue with stopping production even if you are selling/producing on a loss is that you might go under, and if you can not get your customers to the negotiating table you will have to eat the loss for awhile.
And then it all comes down to what kind of financial situation you where in before the inflation started to take off!.
Pretty much it comes down to how much money you can afford to lose and how much money you can loan to stay afloat.
So for production companies this inflation is pure hell!.
And the bad news is that it will continue all of 2022 at least.
So think twice before you go into serious debt with your business, that you will need to pay these loans of going forward.
For restaurant’s and coffee shops and similar establishment’s you need to just raise your prices with the inflation.
If January was 10% more expensive when you bought your items ,that cost has to be put on the consumer/customer immediately!.
Do not wait, and do not eat the cost yourself if you are a small business owner, it just gets worse for you if you do.
Talk to your customers and explain the situation if anybody complains.
One useful trick is to have 3 invoices from your suppliers from 2021 and then 3 invoices from 2022 that you can show your customers that you are not salting their bills for fun, it is out of pure survival for your business.
This way you defuse the conversation by showing your customers why a food item can cost 15 dollars in 2022 that was previously 12 dollars in 2021.
If you can offer free coffee in a restaurant and maybe offer a small cookie in a coffee shop free of charge, these small tokens can go along way with you loyal customers.
Try to come up with small cheap ways if possible to compensate your customers for the price increasments that you have to pass on this year in what we call inflation hell!.
One of our clients has the issue that he is producing an aluminium pipe for a large customer and his raw material price has gone up 400% in 7 months time!.
We helped him negotiate with the large multi billion dollar company(the customer) that they will accept a higher price from him on the pipes and when the deflation starts to kick in we will lower the prices towards the customer again.
And HE sends over the invoices every month now to his end customer on the raw material he uses for their pipes.
And this works because he is upfront with the customer that he can not eat this inflation cost , and keep producing for them the pipes unless they accept the higher prices, even if the contract does not allow for that.
So as a small to medium sized business owner you need to bridge the gap towards your old prices and into the new reality of inflated prices on everything pretty much today.
So negotiate as much as you can and be upfront with your customers, and you do not really have to play hardball just put up your hands and explain the current situation to them.
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