Kelly Bullis: Inflation Strategies – Business Part 2

Tax advice (and others)

Kelly bullis

Last week I presented some strategies for individuals on how to survive the years of high inflation. Of course, there is another completely different group that is affected by inflation and that is small businesses.
Right now, small businesses are already feeling the mounting pressure. The costs of their suppliers are increasing, their employees expect large increases because their personal purchasing power is decreasing, and so on. (Plus, the government has raised the cost of labor with increases in the minimum wage.) If you own a small business, you’ve probably been looking for ways to cut costs for years and am almost out of options.
Have you ever increased your prices? We are most likely at the start of a period of multi-year hyperinflation. When you increase your prices, you are contributing to the rate of inflation. But if you want to survive, you MUST raise your prices or your business will go bankrupt.
Another pressure is on small businesses. However, slower delivery times for almost everything. What does it mean? You should order more than you need now and start building an inventory of items to last a bit before you place another order, sooner than before. It means chewing up some of your working capital. You will need to recoup this by increasing your prices.
So how much are you increasing your prices? If you haven’t raised your prices, you are behind the eight ball, so you have to raise them higher than the current inflation rate in order to make up for lost profits. If you don’t want to increase your prices every month, you will have to anticipate continued inflation for at least the next year and so increase your rates to cover the continuing rise in costs. So here’s the ugly number. Assuming this is the first price increase for you this year, and you don’t want to increase your prices again for at least a year, you should consider increasing your prices by at least 10% as soon as possible. now and 15% would be even better if you can.
It’s coming. You increase your prices, your downstream business customers increase their prices and very quickly inflation explodes. It’s been locked in the bottle for years waiting to burst, and baby! It’s exploding.
Until the pressure begins to ease, you will need to plan for an increase in your prices, as well as a significant increase in your employees for several years. Monitor your cost of goods sold each week, and don’t be afraid to raise prices when you need to to survive. Your only other choice, go bankrupt.
Look at the bright side. Any commercial debt that you carry, in a few years it will be much easier to pay it off. As with individuals, the decline in the value of the dollar makes it less expensive to pay off debt in subsequent years.
Did you hear? Eccl 8:16 says: “When I have applied my heart to know wisdom and to see the affairs that are done on earth, how neither day nor night our eyes see sleep.”
Kelly Bullis is a Chartered Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.

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