Could Your Business Handle Inflation

Could Your Business Handle Inflation


With inflation surging, costs rising and interest rates increasing (after being stable for a decade), businesses may be feeling the heat about their profit margins. Your business may be struggling to absorb these rising costs amid labour shortages, while also requiring spare capital to expand and further digital transformation initiatives.

In a time where growth should be at the forefront of your mind, you may instead be struggling with the incoming additional financial pressure. Here are five measures that business owners can put into place to mitigate the impact of inflation. 

Renegotiate Contracts To Reduce Costs

Many of your fixed-term agreements may have been made previously with pricing based on a certain set of assumptions. A project that commenced several years ago could now be operating at a loss, due to the cost of supplies today. In this instance, renegotiating the contract to reflect these changes is the best course of action. There is no sense in continuing a project if you would be put out of business by the overall cost to you after all. 

Consider Alternative Pricing Strategies

To what degree might you be able to pass the inflationary price rises onto your customers without alienating them? Small scale increases to your products occurring over multiple times may be more palatable to your customers, such as with quarterly rises rather than annual rises. If things swing back, your business can maintain the increased pricing and profit from the gain instead. 

How Do You Manage Wage Increases For Your Staff? 

Consider how wage competitiveness for jobs could impact your staffing. If matching industry expectations for wages in a sector is not feasible, consider alternative options as incentives, such as flexibility, opportunities for career advancement and better work/life balance options (e.g. 4 and a ½ day weeks, WFH Mondays, etc). This might be a method to compete at a lower pay scale by focusing on other benefits. 

What Are Your Key Products? 

Identify the products that your customers come to you for (your ‘milk and bread’ as it were) and use them to stimulate the sales of more profitable products or services. Reduce your key product pricing and instead upsell or cross-sell additional products to increase your customer’s basket size and gain additional purchases. 

Diversify Your Supply Chain

Identify opportunities to diversify your supply chain relationships and mitigate your risk of interruptions. It could be a critical point for your survival – the last few years have demonstrated that reliance on overseas production can be detrimental to a business. You could become a supplier yourself, investigate options closer to home for supply purposes or work out how government incentives could be used to benefit your business. 

Rethinking your strategy for inflation now rather than later could be a key maneuver in ensuring how your business performs in the long term. You can speak with a trusted adviser today for logistical guidance for your business.

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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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