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Inflation is Affecting All of Us!

The four main drivers of the current spike in inflation are the pandemic, supply chain issues, government stimulus money, and Russia’s invasion of Ukraine. 

Higher prices are driven by a demand that is higher than what the market can supply. You can see this in every aspect of inventory, services, and fuel to name just a few. Price increases are growing faster than you can shake a stick at.

As a business owner, you cannot sit still and do nothing about it. It is easier than ever to change your prices. The days of changing price tags or catalogs is no longer an issue. Today, you can change prices with the click of a mouse.

To be a savvy businessperson, you must understand which expense categories are fixed and which ones are impacted by market price increases. Check daily how these inflationary price increases affect your planned P&L for 2022. Quick smart action is required in this inflationary economy.

Interest Rate Increases

The Federal Reserve had to act to help cool the economy by raising interest rates. The impact of these increases on one’s business is not as great, as an increase in product or service cost. 

If you are in a business that requires the consumer to secure bank financing for an auto or home, this may have an effect. A 0.5% to 1% interest rate should not have that much of an effect on most businesses. One should be aware though that interest rate increases do mean that the consumer will have less money in his or her pocket to spend on purchases. Credit card debt will increase the cost to the consumer. 

There is a need for greater analysis of your projected vs. actual revenue. I foresee this as a short-term downward trend, so I would not take much action. On the other hand, if a sustained downward spiral continues, then there is a need to understand what its overall effect would be, and you may need to increase prices and marketing efforts for your business.