Inflation is the number one concern for small business owners.
About 85 percent of small business owners polled in a new survey out today, cite it as a top pain point. The survey, dubbed the MetLife and US Chamber of Commerce Small Business Index, also shows that about 67 percent of small businesses have raised prices, while another four in ten businesses report having decreased staff, or taken out a loan in the past year in response to growing inflationary pressures.
“Inflation is top-of-mind for small businesses as it continues to limit their purchasing power, forcing [them] to raise their prices and absorb higher costs within already thin margins,” said US Chamber Vice President of Small Business Policy Tom Sullivan in a press release about the survey.
But raising prices may not always be the best course. The strategies you implement to combat inflation largely depend on what kind of business you have, says Jeffrey A. Carr, professor of marketing and entrepreneurship at New York University’s Stern School of Business.
For essential goods like food and gas, consumers will notice price hikes but they may not curb their behavior; people are still going to purchase goods if they’re necessary, for instance. However, for non-essential purchases, such as home decor or going out to eat, consumers are more likely to cut back, so you need to be careful about raising prices.
“Price is the most visible part of your product for customers,” says Carr. “There’s always going to be this immediate reaction to prices.”
That’s why you should try other methods before raising prices, if you can. Carr recommends buying product in bulk as soon as possible in case it continues to go up in price. A restaurant may want to stock up on to-go packaging or condiments, for instance.
You can also decrease the size of your products. For example, Carr notes that large companies like Mars and Unilever for example will cut back on the amount of product you get for each item while keeping the same price. It’s less likely that your customers will notice the two fewer ounces in a bottle than the price of your goods going up fifty cents, he adds.
You can also increase the value of your products by offering a better customer experience, as Kristen Durhan writes for Inc. “You need to provide an experience that makes customers choose you and stick with you– even when they have other options.”