Inflation has been growing in recent years, forcing companies to deal with 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 company’s relationship with its customers in the long run.
Fortunately, with the right advance preparation, it’s possible to beat inflation without raising prices for customers. Below, 19 gotechbusiness.com Business Council members each provide advice on how business leaders can overcome the challenge of new or added expenses without passing the cost on to customers.
Contents
1. Determine how to better position the company
If costs rise, the immediate gut reaction is to raise prices. To me, that comes down to using the nuclear option. Price increases should be a last resort and should only be explored after all avenues have been exhausted. Those who use the recession to secure better deals and find innovative ways to optimize their supply chain will be in a better position to cope with a changing economy. – Joe Faithful, Swimming pool magazine
2. Conduct an internal review
Look inside first and take responsibility. Ideally, as a business owner, you foster an environment that fosters innovation and efficiency. Communicate with your team the value of making informed decisions about how they use their time and the value of looking for cost-effective alternatives. Profit-sharing programs and bonuses will also incentivize employees to contribute to cost savings without impacting customers. – Emily Reynolds Bergh, R PR company
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3. Streamline operations
Focus on streamlining operations. Look for cost-saving opportunities and improve internal productivity. By improving efficiency, reducing wasteful spending and increasing employee productivity, companies can absorb rising costs without immediately charging customers with higher prices. – Lala Elizondo, Tulle capital
4. View expenses on a monthly basis
Let’s start by discussing “lifestyle inflation.” When people earn more money, they tend to spend more money. In business, this trend can be as bad as rising costs. Refocus and review your spending every month. If last month’s marketing didn’t pay off much, that could be an expense that you either stop or extend for another month. Negotiate with suppliers again and do your best to keep prices stable. – Sharmylla Ziew, Lending Valley Inc.
5. Build mutually beneficial supplier relationships
Business leaders should prioritize cultivating mutually beneficial relationships with suppliers. 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 overheads shouldn’t start with the customer. It would be a good starting point to look at past and more recent income statements to determine which expenses may generate a healthy return on your investment. Also scale up the customer acquisition methods that yield the best returns and drop all A/B marketing tests to avoid risk. – Rachel McCrary, Collect labs
7. Reimagine the customer experience
Instead of simply updating costs, reimagine the customer experience and remove what no longer adds value. By taking this approach, you evolve your solutions to better meet customer needs, demonstrate your expertise, and better articulate the true value of your offering to customers. – Whitney Alexandra, Whitney Alexandra
8. Prioritize primary customer segments
Ensure there is a strategic emphasis on prioritizing your primary customer segments, which are responsible for 80 to 90% of total revenue. Keep the same level of service and refrain from price adjustments. Compensate by reducing service levels and sales spend on secondary segments to maintain profit margins. – Vinicius Pantoja, offer
9. Implement self-service options
Take advantage of self-service options when your business faces rising costs. Implement self-service options such as an intuitive knowledge base, FAQs, or chatbots so customers can independently find answers to frequently asked questions. Self-service is often preferred and reduces the reliance on your staff to answer routine queries, freeing them to focus on more complex customer issues. – Emilia D’Anzica, Grow Molecules
10. Communicate with your customers
My advice to other professional service providers is to increase communication, not cost. When you have a crystal clear understanding of what matters most to your customer, you can streamline your deliverables to stay focused on them. This can save your team time and effort while preserving and even increasing the value of your services. – Eileen Faucher, Brass tacks health
11. Review every aspect of the business
I cannot say that I have ever worked with such solutions as my company believes in achieving a win-win situation with our customers. Aside from that, calculating every aspect of your business can help with costs. I make sure to stay in touch with my company’s finance department and receive weekly updates on our spending. 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 important expenses are people and the office. One of the most effective ways to reduce expenses is to make sure your real estate footprint is the right size. By leveraging workplace utilization data, you can optimize space, grow your workforce, save on cleaning and energy costs, and mitigate financial risk by eliminating office space that isn’t right for your business. – Allison Ballard, 4SITE by CORT
13. Consider putting factional leaders in place
Companies can save by providing fractional leadership instead of full-time team leaders. For example, a fractional communications leader can be part of the team without joining full-time, saving the company thousands of benefits. As a bonus, this go-between solution often helps leaders and private equity owners with team transitions and M&A. Consider fractional leaders. – Bet Jannery, Titan strategic communications
14. Offer unbundled offers
Introduce an à la carte alternative to your customers by unbundling your company’s offerings. This allows customers to buy only what they need when they need it. For professional service offerings, separate and capture what is the core of your business. Then offer a do-it-yourself option for work that is easy to perform due to its generic nature, as a way to cover labor, machine, and material costs. – Eric Allais, PathGuide Technologies, Inc.
15. Make use of automation software
Automating the process using software will increase the company network. Automation can reduce the number of people required to do the same job and increase the company’s ability to add new customers without adding new employees. Long-term operators will be better prepared before costs rise because they will be more focused on staying in their lane and always improving what they are building. – Adam Rumanek, Aux mode
16. Re-evaluate the marketing and advertising budget
Businesses can reevaluate their marketing and advertising budgets to curb rising costs. Reevaluating doesn’t mean cutting or eliminating, which backfires when it comes to acquiring new customers and brand awareness. It means using data to make informed decisions about where to spend advertising dollars and to assess when you should use paid or organic tactics. – Andrea Acker, Aker ink
17. Conduct a quarterly review of technology costs
The one thing we implemented that had the biggest impact in mitigating rising costs was a quarterly review of all our technology spend. If the technology isn’t fully adopted or doesn’t perform as expected, we’ll stop using it. If we think a contract is too rich, we renegotiate. We proactively need a thorough business case before approving a new implementation, regardless of cost. – Austin Speck, Titan Brands
18. Examine staff resources and dedicated hours
As costs rise, there are some steps business leaders can take before going to the customer. As a service-oriented company, we examine available staff resources and dedicated hours in an effort to find efficiencies. Can we reduce unnecessary meetings or phone calls? Can we stagger reporting periods? We usually discover areas that are overusing resources and make small adjustments before passing the costs on to our customers. – Laura silver, Blue door communication
19. Incorporate additional revenue opportunities into the business model
One way to prepare for new or added expenses without passing the cost on to customers is to consider incorporating additional revenue opportunities into your business to offset the increase in costs. By offering additional products or services in addition to core products and services, you can increase business revenue while providing greater value to your customers. – James Jones, Bump
