It’s difficult to run a business when you have to deal with high, persistent inflation. With prices constantly rising, your inputs get expensive, and setting prices for your products or services becomes a tricky task.
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If you’re a business owner in Nigeria, you’ll know how challenging this sort of situation can be. On the one hand, you may not be able to afford the machines, raw materials, or labour required to run your enterprise. On the other, you’re wary of raising prices too much, because you could lose customers as a result.
How do you make your business thrive in the face of this reality?
This article shares some steps you can take to preserve and extend your revenue generation and profitability even when the general economy is getting pressured by inflation.
Ways To Protect Your Business Against Inflation
Here are six ways to shield your business from the value-devouring effects of continuous price increases, and thrive despite such a trend.
Collect Customer Debts More Quickly
The longer you wait to collect what’s owed you, the less that debt will be worth when you finally recover it. That’s because prices will rise across the board, so that, in the future, the money owed you will only purchase a fraction of what it can today.
This is why you should push for debts to be repaid sooner. Make collections a priority, and adjust the grace period you typically grant your customers for outstanding payments.
Do this with a touch of empathy. Most people also have to cope with rising prices and may have multiple obligations to settle. Let them know that the measure you’re taking is something you have to do, and not just designed to ‘harvest’ money off their wallets.
Cut Waste And Raise Efficiency
When things become expensive, you’ll want to make every Naira count.
Look through your operations, and examine your records. What aspects of your business produce unnecessary expenses? Are there ways to cut production, administrative, or utility costs, without compromising on the quality of your output?
Even if you think there isn’t much room for improvement, you should check, just to be sure.
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Also, seek inexpensive ways to increase productivity. You would be surprised what skills courses (including the ones available for free) can do for your productivity. When your output increases, you’ll be positioned to sell more products and make more money.
Purchase Hard Assets
Here, hard assets include the tools and machines you work with.
If prices continue to rise, the equipment and vehicles you purchase today will become more expensive in the future. Buying them today will mean getting them at prices that may be considered a bargain in a few months or years.
Besides, it’s a great way to preserve and expand value. You’re not just buying things; the machines you acquire will be used to produce products that’ll be sold for more money.
Replenish Your Inventory
The idea here is similar to what we’ve considered with purchasing assets. It will cost more to stock up goods in the future than it does today. Why not stock up now?
Of course, your ability to do this will depend on your financial status. If you can’t afford to fill your shelves now, you should focus on cutting costs and raising prices, so that you’re able to raise enough to buy goods later on.
Add New Revenue Sources
Improving your skills and acquiring new ones can help you boost your productivity. But it’s also a good idea to add more revenue sources to the ones that currently exist.
Here’s an example: if you run a web development company, you could expand your revenue sources beyond building websites for clients, to training people who want to be web developers. Training can also form part of the offerings of bakeries and fashion designers.
Raise Prices To Track Inflation
Ultimately, you will have to raise prices to keep within an appreciable range from the inflationary trend. You can make small but frequent changes to your prices so that your customers understand why this is happening.
Find out more tips for raising prices in our article, How To Raise Prices Without Losing Customers.
Navigating inflation is tough. But it’s not impossible. The key to staying afloat despite persistent price increases is to strengthen your productive capacity, expand your revenue sources, raise prices smartly, and collect payments on time. These tips should help you succeed in times like these.
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