Tackling inflation challenges: Insights for business owners

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Inflation is not a new concept. It’s an expected part of the typical ups and downs of doing business. But managing profit margins during an inflationary period can be especially difficult.

As a business owner, you already understand that inflation concerns are a fact of life. Any time there is a spike in costs, the impact to your business can be significant. However, you may not recognize that the current set of inflationary pressures is unique and may require you to rethink how you manage costs so your business can continue to grow and thrive.

Unprecedented challenges

Inflation is not a new concept. It’s an expected part of the typical ups and downs of doing business. But managing profit margins during an inflationary period can be especially difficult. When there are other factors at play, such as disrupted supply chains and the high cost and scarcity of labor, the challenges can be significant.

67% of small business owners surveyed fear that inflation will hurt their ability to recover†.

No simple answer

The natural response to escalating costs is to raise prices and cut expenses. However, if done incorrectly, this approach could deter customers and reduce your chances for growth. Effective revenue management relies on identifying strategic cuts that don’t adversely affect operations or the customer experience and making investments that will pay dividends over the long haul. Also, consider coupling price increases with product redesign in a way that demonstrates value to the customer.

By playing both offense and defense in a disruptive environment, companies can position themselves to outpace less-proactive competitors long after the volatility ends§.

Cash matters

During an inflationary period, it is critical to take steps to improve cash flow. Greater efficiency in accounts payable and accounts receivable can typically help reduce the cash conversion cycle, freeing up cash to make investments, reduce debt, pay dividends, and fund mergers and acquisitions#.

74% of surveyed small business owners say inflationary pressures have negatively impacted their business’ financial healthҰ.

Looking out for you and your business

Huntington can help you address many facets of your business by bringing forward key insights, new ideas, and thoughtful solutions. Connect with the business banking team at Huntington to discover the many ways we can help you grow and strengthen your business.

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† Casto, Chuck. 2021. Alignable: 67% of Small Business Owners Fear Inflation Will Hurt Their Business Recovery. May 6. Accessed November 10, 2021.  

§ Heinrich, Jason, Simon Henderson, Tom Holland, and Megan Portanova. 2021. “6 Strategies to Help Your Company Weather Inflation.” Harvard Business Review . Accessed November 10, 2021.  

Poczter, Sharon. 2021. Everything You Ever Wanted to Know About Inflation Including How to Handle It. October 28. Accessed November 10, 2021.  

# Shah, Ojas, and Zachary Silverman. 2021. Unlocking Cash From Your Balance Sheet. November 4. Accessed November 10, 2021.  

Ұ Goldman Sachs. 2021. Survey: The COVID Surge is Slowing the Road to Recovery. September 28. Accessed November 10, 2021.  

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