The peso today is worth less (and less) than it was in previous years. Our currency has hit its lowest level to date in 13 years versus the dollar, at 53.80. At the start of 2018, the peso shed 7.8 percent of its value, and with the seemingly unstoppable rise of the inflation rate, it is looking like your business will have challenges in maintaining its foothold in the market.
While the current economic climate leaves little to be desired for, you can still take control of the situation. Big businesses do have the resources to cushion the blow of inflation and a weaker peso. But your small enterprise can also apply a few strategies to survive the higher cost of goods and the dwindling spending power of Filipino consumers.
Think Clearly, Take Stock
The first order of business is to recognize that your profit margins are likely to take a hit. Sales might fall, your vendors or suppliers have probably raised their prices, and you might also be looking at an increase in your lease. With your operating expenses calling for more capital and money coming in slow, your third or fourth quarter might be in the red.
Accept that your business will go through a loss and then calmly work with your team or a financial adviser to determine how to move forward. With a clear head and perspective from another professional, you’ll be in a better position to come up with a plan to counteract the impact of inflation.
Your Strategies for Survival
Raising Prices
Your first instinct might be to raise your prices for the products or services you offer. Price adjustment is necessary to stay operational, but you still need to make sure you remain competitive. Look into the price increase other businesses in your industry are doing. Then consider whether a certain percentage may be unattractive to your consumers. A small price jump could help you weather the inflation hike without turning off your market.
Increase Inventory
The best way to curb the impact of rising inflation is to act ahead; if your business depends on a heavy volume of inventory, stock up before suppliers raise their prices. You can also negotiate contracts to obtain discounts or better payment terms with vendors you frequently use.
Keep Good Employees
Inflation hikes will create a salary pressure; the cost of living has gone up, it only makes sense to pay your employees enough to help them meet their needs. But you might not have enough cash to increase salaries, even at a minimum percentage.
Here’s where transparency helps calm anxieties with your workforce and prevent the best ones from seeking better compensation elsewhere. You need to reassure workers that you’re doing everything you can to keep the business afloat and keep everyone employed. You also need to be honest about not having enough resources to meet a wage increase, but you can come up with creative ways to help your workers financially.
For example, offer credit card rewards or extra time off. They will not cost your business much, but they may be able to retain your best employees.
Pay Your Debts
Pay debts with variable interest rates because they’re likely to rise along with inflation rate. It is also a good time to establish good credit standing with banks; if you pay your obligations on time, your business may have an easier time getting a loan in the future.
Acquire Hard Assets
Hard assets tend to retain their value, from your equipment to your business’s building. When taking out a loan is doable at this time, invest the money in assets that will help with your operations. Whether it’s a van for making deliveries or kitchen equipment for your restaurant, tangible goods allow you to make your money work for your business.
The inflation hike is, at the very least, not the ideal situation for many small businesses. But you have options to prevent the country’s difficult period from turning into hard times for your company. Get organized. And apply strategies that are relevant to your enterprise.