There are quite a few reasons why it costs more to do business this year. A record-low unemployment rate (just above 2% in the most competitive markets) and state and locally-mandated minimum wage hikes have forced employee wages to go up at an amazing pace. Add in some of the strains that businesses are feeling from tariff changes, and it’s likely that any of the sales increases the National Retail Federation predicted for this year may be eaten up by all the extra costs.
There’s also inflation, too, which is creeping up a little each day – adding 2.2% to the cost of just ordering typical supplies, like food ingredients and paper. For the business who owes money, debt costs more this year, as well; the Federal Reserve bumped up Prime rates another quarter of a percentage point, making it cost more to pay down what companies already owe.
If this all feels like too much doom and gloom, take heart. While the numbers are scary, there is a bright lining. Consumer confidence is up, as well, and people are reacting favorably to some of the new tax cuts and job markets by buying. For the company with something to sell, it can be enough to really turn things around (or at least stop some of the bleed from all of those other costs we mentioned.) There are also some small changes you can make to help your bottom line in a big way.
See what savvy business owners are doing to keep more of their money in this time of rising costs.
1. Utilize credit rewards wisely.
If done correctly, those cash-back and points perks from your business credit card can be used to cut costs in many areas. Make sure you’re getting the most from your rewards program and take time each month to review your options. Some programs require you to opt-in to higher earning promotions, so keep on top of changes and new offers to get an extra 2% back on gas, for example. Work your cards so that you use the appropriate card for the best offer available, and make sure team members are using the cards in a way that gets you the most back.
2. Pay down high-interest debt.
If a big chunk of your revenue is going to pay interest, you’re missing out. Get a handle on existing debt by paying off those cards and loans with the big APR’s first. If that’s not possible, consider a consolidation loan or balance transfer offer that gives you a lower rate for the time you are paying down your card. (Just be wary of any “normal” rate that will kick in later – which can sometimes be higher than your existing, pre-transfer rate.)
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3. Reinvest tax breaks.
Many businesses got a reprieve from a fraction of corporate taxes this year with the Tax Cuts and Jobs Act (TCJA), and that’s welcome news for anyone fighting the war against inflation. If you’re not exactly sure how much you’ll be getting in 2019, have a talk with your tax professional. These funds should be examined to see how they can best be used for business growth or improvement, paying down that high-interest debt we discussed, or putting programs in place to attract better workers without raising wages too sharply. The freed-up funds from tax breaks can make a significant difference in any business’ budget!
4. Collaborate with other owners.
When tariffs caused many small business owners in the steel industries to panic, some decided to combine their buying power to find their own distributors. This same tactic is being used to secure lower-priced supplies, tech and infrastructure upgrades, and even health insurance. The formation of organizations, cooperatives, and guilds is not a new one. Look to see what groups exist in your industry or geographic area; if there isn’t one for your company, see about starting one.
5. Utilize tech to identify inefficiencies (and correct them.)
Technology can cost money, and no one wants to spend before it’s necessary. In the case of the small business who needs a competitive advantage, however, tech can be used to find savings opportunities and analyze ways to get leaner and better – sometimes without spending any money above the cost of the software product. Depending on your business niche, there is likely a high-tech way to make sure you’re handling logistics, hiring, and accounting properly (not to mention providing your service in the best manner possible.) While spending money to save money can seem counterintuitive, when it comes to identifying waste or incompetence, the outlay is usually worth it.
6. Take advantage of new investing opportunities.
The recent Jobs Act 3.0 opened doors for a new batch of accredited investors to hit the markets with their cash and eagerness to be a part of something big. If you’ve struggled to find startup cash, the changes are going to be good for you. Look at what new investment sources you may qualify for and seek out a those that fit your business model and long-term strategy. Getting access to funds is no longer a game for just the biggest names in your industry.
These are just a handful of the ways that most businesses can work against inflation, but additional ideas may be available – depending on your particular industry, geography, and business size. When hard costs rise, it can be discouraging for the small business that is already struggling to scale. Before you delay investing in your business or hiring that additional worker, look to see if there are smarter ways to do what you’re already doing. With most U.S. businesses suffering from the same cost increases, collaborating and consulting with others in your niche may be vital to surviving.
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