NEW YORK (AP) — As labor and other costs rise at small businesses, owners need to look across their companies for ways to protect their profits.
Many start with a hard look at expenses to see which they don’t really need, or might be able to spend less on. Increasing income is another way to ease the impact of inflation.
Seven things owners should consider when dealing with rising prices, including what they charge customers:
— A review of a company’s finances is best handled with a trusted adviser; for example, an accountant or fellow business owner who can play devil’s advocate and may have suggestions about alternatives.
— Renegotiate contracts and terms with suppliers, advises Dennis Ceru, an entrepreneurship professor at Babson College. They may be willing to give you discounts for preordering, paying early or buying bulk, he says. And in the case of cellphone or internet providers, you may have some leverage given the competition they face.
— Nickels and dimes add up. You can lose small amounts of money that seem insignificant until you consider them in the aggregate. For example, if you pay your own heating and air conditioning costs, see where there are cracks in the walls or drafty windows — plugging leaks will save money. Comparison shop for items like office supplies to ensure you’re getting the best price, and see if vendors have loyalty programs.
— Focus on revenue and productivity growth. Bringing in more business will help offset costs. Motivating staffers, even with financial incentives like awards and bonuses, to increase their output can also limit the effects of inflation.
— Cut costs, but don’t slash and burn, especially if you have employees. For example, don’t stop supplying coffee, sodas and snacks in the break room. Anything you do that hurts morale can backfire.
— If you’re thinking about raising prices, “keep an eye on the competition,” Ceru says. “Raise prices when needed, but a tad below theirs.”
— Be up-front with customers about price increases. Don’t let regular customers find out they’re paying more when they go online to order, or when the invoice arrives. Being transparent — letting them know why prices are going up — will help them accept the higher costs and stay loyal to you.