Inflation has grown over the past few years, forcing businesses to navigate higher material, supply and labor costs. When faced with rising costs, business leaders may choose to pass these costs on to customers by raising the prices of their products or services. While this is a common “solution,” it can negatively impact a business’s relationship with its customers long term.
Fortunately, with the right preparation beforehand, it is possible to get the upper hand on inflation without increasing prices for customers. Below, 19 Forbes Business Council members each offer advice on how business leaders can overcome the challenge of new or added expenses without passing the cost to customers.
1. Determine How You Can Better Position The Company
When faced with rising costs, the immediate gut reaction is to raise prices. To me, that is tantamount to using the nuclear option. Price increases should be a last resort and explored only after exhausting all possibilities. Those who leverage the downturn to strike better deals and find innovative ways to optimize their supply chain will find themselves in a better position to weather a changing economy. – Joe Trusty, Pool Magazine
2. Do An Internal Assessment
First, look inward and take responsibility. Ideally, as a business owner, you will foster an environment that promotes innovation and efficiency. Communicate to your team the value of making thoughtful decisions in how they use their time and the value of seeking cost-effective alternatives. Profit-sharing programs and bonuses will also incentivize employees to contribute to cost savings without impacting customers. – Emily Reynolds Bergh, R Public Relations Firm
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3. Streamline Operations
Focus on streamlining operations. Seek cost-saving opportunities and enhance internal productivity. By improving efficiency, reducing wasteful spending and increasing employee productivity, businesses can absorb rising costs without immediately burdening customers with higher prices. – Lala Elizondo, Tule Capital
4. Review Expenses On A Month-To-Month Basis
Let’s start with discussing “lifestyle inflation.” When people make more money, it tends to cause them to spend more money. In business, this tendency can be just as bad as rising costs. Refocus and revise your expenses each month. If last month’s marketing didn’t yield much, that can be an expense you either terminate or prolong for another month. Renegotiate with vendors and try your best to keep prices stable. – Sharmylla Siew, Lending Valley Inc.
5. Build Mutually Beneficial Vendor Relationships
Business leaders need to prioritize cultivating mutually beneficial relationships with vendors. By emphasizing win-win partnerships that minimize costs, leaders can maximize value for all parties involved. – Jared Yellin, Project 10K
6. Examine Profit And Loss Statements
Managing overhead expenses shouldn’t start with the customer. Taking a look at past and more recent profit and loss statements to determine what expenses might be generating a healthy return on investment would be a good starting point. Also, scale up the customer acquisition methods that are producing the best return and drop any A/B marketing testing to avoid risk. – Rachael McCrary, Gather Labs
7. Reimagine The Customer Experience
Rather than simply updating costs, reimagine the customer experience and remove what’s no longer adding value. By taking this approach, you will evolve your solutions to better meet the needs of customers, demonstrate your expertise and be able to better articulate the true value of your offering to customers. – Whitney Alexandra, Whitney Alexandra
8. Prioritize Primary Customer Segments
Ensure a strategic emphasis is placed on prioritizing your primary customer segments, which are responsible for 80 to 90% of total revenue. Maintain the same level of service, and refrain from any price adjustments. Compensate for it by reducing service levels and sales expenditures for secondary segments to preserve profit margins. – Vinicius Pantoja, Proffer
9. Implement Self-Service Options
Leverage self-service options when your business is faced with rising costs. Implement self-service options such as an intuitive knowledge base, FAQs or chatbots to enable customers to find answers to common queries independently. Self-service is often preferred and reduces the dependency on your staff to answer routine inquiries, allowing them to focus on more complex customer issues. – Emilia D’Anzica, Growth Molecules
10. Communicate With Your Customers
My advice to other professional service providers is to increase communication, not fees. When you have a crystal-clear understanding of what matters most to your client, you can streamline your deliverables to stay laser-focused on that. This can save your team time and effort while maintaining and even increasing the value of your services. – Eileen Faucher, Brass Tacks Health
11. Assess Every Aspect Of The Business
I can’t say that I ever practiced such solutions, as my company believes in achieving a state of win-win with our clients. That aside, calculating every aspect of your business can help with costs. I make sure to keep in touch with my company’s financial department and receive weekly updates on our expenses. If some are irrelevant to our ongoing needs, we simply shift the focus away from them. – Valentina Drofa, Drofa Comms
12. Evaluate Your Real Estate Footprint
For many organizations, the most significant expenses are people and the office. One of the most effective ways to reduce spending is to make sure that your real estate footprint is right-sized. By leveraging workplace utilization data, you can optimize space, grow your workforce, save on cleaning and utilities costs and mitigate financial exposure by eliminating office space that isn’t working for your business. – Allison Ballard, 4SITE by CORT
13. Consider Putting Fractional Leaders In Place
Companies can save by providing fractional leadership in place of full-time team leaders. For example, a fractional communications leader can become part of the team without joining full-time, saving the company thousands in benefits. As a bonus, this interim solution often aids leaders and private equity owners during team transitions and mergers and acquisitions. Consider fractional leaders. – Beth Jannery, Titan Strategic Communications
14. Provide Unbundled Offerings
Introduce an à la carte alternative to your customers by unbundling your company’s offerings. This empowers customers to procure only what they need when they need it. For professional services offerings, separate and capture what’s core to your business. Then provide a DIY option for work that’s easily accomplished due to its generic nature as a way to defray labor, machine and material costs. – Eric Allais, PathGuide Technologies, Inc.
15. Leverage Automation Software
Automating the process using software will increase the company net. Automation can decrease the amount of people needed to do the same job and increase the company’s ability to add new customers without adding new employees. Long-term operators will be more prepared before costs rise because they will be more focused on staying in their lane and are always bettering what they are building. – Adam Rumanek, Aux Mode
16. Reevaluate The Marketing And Advertising Budget
Businesses can reevaluate their marketing and advertising budget to curb rising costs. Reevaluate doesn’t mean cut or eliminate, which will backfire when it comes to new customer acquisition and brand awareness. It means using data to make informed decisions about where you’re spending ad dollars and assessing when you should be using paid or organic tactics. – Andrea Aker, Aker Ink
17. Perform A Quarterly Review Of Technology Costs
The one thing that we implemented that made the biggest impact to mitigating rising costs was a quarterly review of all of our technology spend. If the technology isn’t fully adopted or isn’t performing as expected, we cut it. If we believe a contract is too rich, then we renegotiate. We proactively require a thorough business case before a new implementation is approved, no matter the cost of it. – Austin Speck, Titan Brands
18. Examine Personnel Resources And Dedicated Hours
As costs rise, there are a few steps business leaders can take before passing to the client. As a service-based company, we examine personnel resources and dedicated hours on file in an effort to find efficiencies. Can we reduce unnecessary meetings or calls? Can we stagger out reporting periods? We typically uncover areas using too many resources and make small adjustments before the costs get passed to our clients. – Laura Silver, Blue Door Communications
19. Incorporate Additional Revenue Opportunities Into The Business Model
One way to prepare for new or added expenses without passing the cost to customers is to consider incorporating additional revenue opportunities into your business to offset the increase in expenses. By offering ancillary products or services alongside core products and services, you can increase business revenue while also providing more value to your customers. – James Jones, Bump
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