Small Business changes imposed by the coronavirus have been difficult to endure to say the least. Everything that we knew as “normal” went away and now, we must face the transformation of today’s habits and create a new “normal”. The most significant consequence of these changes to your business……the cost of running it is on the rise. This will leave less of your income available to you. In other words, you are making less money.

 

On top of all of that, the economy has experienced inflation at a rate of approximately 5.4% over the past few months, now it is up to 6.2%. Those rates are higher than what any of us have experienced in over 30 years. The causes are a combination of things happening all at once: such as, supplier shortages, labor shortages, Federal reserve doubling up the money supply, stimulus payments, vaccine rollouts, etc. Basically…consumers and investors have the cash to spend; however, not as many goods and services out there to spend it on. Just recently, Mondelez who operates the Chips Ahoy/Ritz brand announced a 7% increase in 2022. Meanwhile, Kraft has already raised prices of their products by 5%. Similarly, we all have witnessed gas prices as of late go up by more than $1 in 2021. Finally, Dollar Tree has just made a permanent change to make their price point $1.25 by next year. (I wonder if they will rebrand their name to Dollar and a Quarter Tree?)

 

2021 Inflation Chart by Month

 

How does this impact your small business? Basically the extra costs are coming out of your bottom line. Either you will/have experienced workers requiring higher pay (if you can find them to hire), and/or you are paying higher prices for your materials.

 

A few suggestions that I’m sending out on how to combat these issues:

 

1. Strengthen your prices. If it costs more, you will have to charge more.
2. Evaluate your supply chain. Establish alternate supply chains to maximize delivery options.
3. Evaluate labor market. Take a look at going labor rates, new ways to market job vacancies, etc.
4. Look at loan rates. Although I never suggest taking out loans unless absolutely necessary. Interest rates are still at an all-time low. And, the best time to apply for a line of credit is when you do not need it.

Just some thoughts to ponder as we approach the Thanksgiving Holiday.

 

Lastly, we are very thankful that you continue to choose us to help you with your accounting, payroll and income tax needs. We also promise to never take the trust you have in us for granted.

 

Happy Thanksgiving,

 

From your accounting team at Estess CPAs