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Don’t Let Inflation Destroy Your Business 

The news is alight with talk of recession and inflation, and many small business owners wonder what that means for them. Henry Ma, the CEO of embroidery and custom apparel machine provider Ricoma, has experience helping small businesses in inflationary times, as most of the company’s customers are small business owners.

The most important thing for a business owner to do in the face of inflation — or any economic downturn — is stay calm. The natural instinct is likely to panic in the face of adversity, but this is an overreaction to conditions that are only temporary. 

“We’ve seen it before, and we’ll see it again: the economy will go through ups and downs, but it will eventually recover,” says Ma. “The goal of a business should be to persist and weather the storm so that they can thrive when they come out on the other side.”

Purchase raw materials upfront

One strategy that businesses can use to become less vulnerable to inflation is by bulk purchasing materials and supplies upfront. If the costs of supplies are expected to go up in the future, it can lead to significant savings in the long term to buy wholesale. Of course, this requires the business to have enough cash flow to make this investment, but if it is within the business’s financial abilities, it will likely prove to be a wise decision.

However, Ma cautions that there are only certain things a business owner should invest in upfront. “Only purchase supplies in bulk that you use often and won’t go out of style,” he says. “For example, in the custom apparel industry, items like needles, thread, and common blank garments are good ideas to buy in bulk. Don’t spend too much money on items that are ‘fads,’ because this could leave you with stock you cannot sell.”

Furthermore, it is important for business owners to be cautious not to overstock themselves. In addition to the challenges of selling excessive stock, it is essential to remember one crucial factor: storage space. A business can only stock up on as much material as it can store in its warehouse (or garage, if it’s a home business). Buying more than one can store means adding extra storage space.

Increase efficiency in other areas

Companies can also look to increase the efficiency of other areas of their business. While it is possible to find other suppliers offering cheaper raw materials, this is not always a solution, as it could cause a significant drop in the quality of the product. Since the cost of supplies is rising, businesses should find other ways to cut costs without affecting the quality of the product.

“Some ways businesses can maximize their margins include streamlining their production process, rearranging their workshop or workstation, investing more time in improving their craft to produce higher-quality products, or investing in larger equipment to help them save time and increase their rate of production,” Ma explains. “Although these strategies might mean there is less profit margin per item, there will be more profit due to an increase in production capacity.”

Adding value to your company’s services

Many business leaders think that raising prices in response to market conditions is the immediate response to inflation. While this step is often necessary for a business to take, it must be done strategically to prevent the loss of customers. “Explain to your loyal customers that you’re having to raise prices due to increased costs,” Ma suggests.

Ma also suggests businesses find a way to provide added value to their product or service when it comes time to increase prices. He says that offering services relevant to their customers can soften the blow of the increased price.

“Think of ways to add new revenue streams to your service that are not dependent on raw material inputs,” says Ma. “In the custom apparel industry, some great examples are digitizing and design services. These services only require you to purchase a software program and use a computer that you likely already own. They come with few to no additional costs and can be used as an ancillary service to bring in more revenue, or given as a free or low-cost ‘bonus’ to customers unhappy with increasing prices.”

Ma wants to remind business owners that, while it can be difficult to make it through a recession, surviving is a matter of adopting the right strategy. “Find the ways to cut costs that make the most sense for your business,” he concludes. “It might be buying materials in bulk, investing in your business to increase production efficiency, or adding extra services to your portfolio to add extra value. Decide what is best for you — and your customers — and persevere through adversity.”

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