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Kelly Bullis: Inflation strategies – part 2 business

Kelly Bullis

Kelly Bullis

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Last week, I introduced some strategies for individuals on how to survive high inflation years. Of course, there is another completely different group who are impacted by inflation, that being small businesses.
Right now, small businesses are already feeling the pressure building. Their supplier costs are going up, their employees are expecting some significant raises because their personal spending power is shrinking, etc. (Also, the government has been increasing the cost of labor with minimum wage increases.) If you own a small business, you’ve probably been looking for ways to cut costs for years and have just about run out of options.
Have you raised your prices yet? We are most likely at the beginning point of a multi-year hyper-inflationary time. When you raise your prices, you are contributing to the inflation rate. But if you want to survive, you HAVE to raise your prices or your business will shrink into bankruptcy.
There is another pressure building on small businesses. That being slower delivery times for almost everything. What does that mean? You have to order more than just what you need right now and start building up an inventory of items to last a bit before you place another order, sooner than you used to do. That means chewing up a chunk of your working capital. You will need to recover that by raising your prices.
So how much do you raise your prices? If you haven’t been raising your prices, you are behind the eight ball, so you need to raise them higher than the current rate of inflation in order to make up for lost profits. If you don’t want to be raising your prices every month, then you will have to anticipate inflation continuing for at least the next year and thus raise your rates higher to cover the continued rising costs. So, here comes the ugly number. Assuming this is the first price increase for you this year and that you don’t want to raise your prices again for at least another year, you should consider raising your prices by at least 10% right now and 15% would be even better if you can.
Here it comes. You raise your prices, your downline business customers raise their prices and pretty soon, inflation is exploding. It’s been locked up in the bottle for years waiting to break out, and baby! It’s breaking out.
Until the pressure starts to ease, you will need to plan on raising your prices, along with handing out hefty raises to your employees for several years. Watch your Cost of Goods Sold weekly, and don’t be afraid to raise prices when you have to in order to survive. Your only other choice, go out of business.
Look at the bright side. Any business debt you are carrying, in a few years, it will be much easier to pay it off. Just like for individuals, the value of the dollar shrinking makes it cheaper to pay off debt in later years.
Have you heard? Eccl 8:16 says, “When I applied my heart to know wisdom, and to see the business that is done on earth, how neither day nor night do one’s eyes see sleep.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at Also on Facebook.


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