SMALL BUSINESS DEVELOPMENT CENTER By Marshall Doak, SOU SBDC Director
Now that the COVID Pandemic lockdowns and re-openings are in the past, we can start assessing the aftereffects of the policies that were instituted as a reaction to the crisis. Whether or not all economists are in agreement regarding the causes, it appears there is agreement on the fact that we have entered an in ationary environment. This is going to prove just as challenging to manage a business in as the COVID Pandemic situation was these past two years. Recent information indicates that this bout of in ation is not going to be transitory, rather we are projected to have substantial in ation for some time to come. The effects of an in ationary environment are not felt evenly throughout the economy, so it will be to your bene t to keep an eye on your business and the effects in ation will have on your pro tability and costs. Large-group statistics may not tell the story for your individual company.
Business Strategies for an In ationary Environment
This article is a synthesis of thoughts on in ation, some literature research, and some information gleaned from rsthand observations of the actions and decisions that businesses are making around the Southern Oregon region. It has become evident to me that the businesses which are able to best navigate the in ation challenges are those which are prepared to survive and are not those locked in a reactive state of disarray. It is said that in ation acts like a tax to businesses, but I look at it as more of a stealth event by taking momentum, resources, energy and margin without providing any return. It can be a silent killer of commerce and certainly limits business functionality and growth potential. In ation creeps into business operations through three principal avenues: nance, operations and personnel.
With respect to nance, in ation’s effects can be: Destructive to your margins. Margins are what a business lives and dies by. In an environment where margins shrink, pro tability follows. The only manner to measure the effects of shrinking margins is to have the cost and revenue data from previous periods in hand to compare to today’s results. Drawing comparisons between like periods is effective to understand the amount of shrink taking place. The of cial in ation rate published does your business no good to use as a reference for making decisions. Your experience with in ationary forces is unique based on a number of factors speci c to your industry and business and could substantially differ from published data.
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Photo by Frank Busch on Unsplash
