Inflation sounds like a bad thing, but it actually benefits businesses in select scenarios. Here’s what you need to know about it.
No one likes to hear that we’re headed toward inflation. It generally means bad news for business owners, and data from the U.S. Bureau of Labor Statistics shows that inflation recently hit a 30-year peak. Businesses across the board are now tasked with finding a way to make up for rising labor, inventory, and transportation costs. It’s impacting consumers, too, as they experience higher prices for commodities.
Nobody is free from the pressure, but there is some good news: Inflation can also bring in some benefits to your business. Here’s what you need to know about how your business could actually profit from inflation.
5 ways inflation may benefit your business
It may seem counterintuitive, but your business can benefit from inflation. Here are some of the ways rising rates may become a good thing:
1. You can raise your prices
Inflation means prices of raw materials, transportation, and labor also start rising. This means businesses across the board suddenly have the opportunity to raise their prices to create a better margin. This is especially good if you are a smaller business that has been forced to keep prices low to compete with larger competitors. Inflation tips the scale by allowing you to raise your prices without any risk of losing customers. Some industries – including retail, biotech, home appliances, and manufacturing – have even seen an increase in profits while gripped by inflation.
2. Your inventory grows in value
With the global supply chain still clogged, businesses that were able to amass inventory have seen the value of that inventory skyrocket. Such businesses can sell their products at much higher prices than normal, and even businesses that didn’t stock up stand to benefit from this scenario. This is because prices are unlikely to fall once they increase – even after costs reduce – so businesses can bulk buy to hedge against inflationary pressures.
3. Company debt becomes cheaper
Business owners who have taken out loans stand to gain a lot from inflation. This is because the value of the dollar drops but the amount you owe stays the same, so your debt suddenly becomes less of a burden for you. Businesses with fixed mortgage rates and other types of loans may find it easier to pay their debts when inflation happens, aspayments will take a diminishing share of company income. Lenders thus tend to increase interest rates during a period of inflation to balance things out, making it unwise to go borrowing after the inflation has already hit.
4. The economy gets stimulated
Inflation stimulates the economy by stimulating consumer action as they hurry to purchase ahead of anticipated price hikes. If the prices of your products were falling as a result of deflation, customers may be tempted to wait things out for a year or more to snap up your product at the lowest price. It makes economic sense to do so. It also makes economic sense for them to buy products now rather than in the wake of inflation, as the prices of commodities rise. This incentive to buy now stimulates the economy, which is good for business owners like you.
5. You have greater flexibility in wage allocation
Increasing prices make it easier for companies to raise wages. They also lend greater flexibility in doing so, because employers are free to not raise wages by the same extent as inflation. This increase in wages boosts morale, productivity, retention, and recruitment, which are all wins for your business.
Contact MetaGrowth Ventures today
Are you looking to scale your business in spite of the inflation? MetaGrowth Ventures can help. Our consulting firm specializes in working with founders who want to take their companies to the next level through the development of a world-class sales team. We have thousands of hours of expertise in the field, and that has uniquely positioned us to provide our clients with relevant, proven, and scalable solutions-based consulting.
Contact MetaGrowth Ventures today to learn more.
