Chandrashekar LSP on how to deal with inflation


Inflation is a big problem right now. The costs of goods and services are rising, making it increasingly difficult for companies to make ends meet. Why is inflation so high now? Everything from the war in Ukraine to strong demand squandering supply is behind the wave. What should a small business owner do?

In this special episode of Small Biz in :15 on location, Small Business Trends Editor-in-Chief Shawn Hessinger interviews business expert Chandrashekar LSP, senior evangelist of the Zoho Corporation, to discuss how to fight inflation with your business.

How do companies deal with inflation?

Shawn: Inflation is a big problem with small businesses in terms of their supply. What steps can small businesses take to, if not keep inflation in check, at least mitigate the effect it has on their business?

Chandrashekar: This is a challenge, but remember that data is always your best friend.

First, understand what your business data is telling you and predict what will happen based on past trends. Then you can make an informed decision about when to raise prices and at what level. Second, in times of inflation, know that it’s a good time to understand which aspects of your business can be automated. Then act on it, because all this automation will essentially help you, even if it’s not right away.

So by understanding those aspects, understanding how to change the processes and making sure that the investment you make in your business today helps you run it now and in the future.

How to deal with inflation without harming your business?

Shawn: How do you use data to find out if you’re going to raise prices? First, is that the right solution to raise prices? And if so, how can you raise prices without driving your customers away or destroying your business or its competitive advantage?

Chandrashekar: Should every company raise prices? I do not think so. I think there are other ways to reduce that. For example, if you get a specific price for a specific product… you might be able to buy and stock some extra storage and stock. That way, you can limit the price increase to a point where you can delay it and still meet your most important obligations.

Then look in your system to see how profitability margins have changed over the past 12 or 18 months. These indicators are good enough to help you understand if you really need to raise prices.

Also, ask yourself if you can reduce just by having more inventory in the store. And if it makes sense to you, go for some storage space or a small warehouse to keep those components. But there comes a point where even that has to stop. At that point, you have to decide when to stop and the decision should be based on data.

And then you also see the trends where there is inflation and then there are deficits. There are logistical and supply problems. Sometimes it’s all about timing.

So there are quite a few factors and attributes that, based on the company, you can put your finger on it and say, “Okay, these are the things I can do.”

But in general the idea is that you have data and there are things you can do… that’s the limitation that can help in the first place. And then there comes a point where you have to pull the trigger. But pulling the trigger is absolutely necessary with all the data and information you have.

How do companies deal with inflation?

Shawn: Let’s take an example of a hypothetical company. Let’s say I’m an e-commerce company that’s been hit by a price increase for everything I sell. How do I start deciding whether to raise prices, how much to raise them, and what that will do to my business overall? Because ecommerce is one of those businesses where unless I’m making something and nobody else is making it, people everywhere will be looking for something cheaper than mine. So pricing becomes really important for e-commerce.

Chandrashekar: It’s more than just the price; it is the availability of products. And what actually drives the profitability of some of these ecommerce spaces is the fact that you can get… let’s say, for example, something I can relate to is the availability of baby food.

There are many places where there is no baby food. So the fact that you have it gives you an advantage whether it’s way overpriced or overpriced. Right? Because it’s all about availability. It is a supply and demand challenge that everyone has to deal with.

So, can you get a head start there as a baby food company? Can you do something and understand what the data is telling you? Again, this is where data helps you understand where the shortages are, and you can stock up on needed stuff and give your ecommerce store a competitive edge.

Let’s say there is no supply shortage. Then it’s all about the price. When the cost of acquiring goods has changed, how do you increase the price appropriately? Do you do it once or spread it out over time? You look at your profit margins and you say, “Hey, here’s a goal: I want to have a profit margin right now and profit margins increase by 20%.” And your goal is not to go below 17.5%.

However, do not change the price overnight. Just go there and know that you can reach your goals by the end of the year if you praise it this way. Again, that’s where data is going to help you.

Any company size will be hit hard by inflation. But the first to be hit will be the small businesses, as they depend on the supply chain from the bigger guys who are also hurt.

But again, think of ways you can look at new avenues and new opportunities in terms of how business models or pricing models can help you. It doesn’t always have to be about increasing the price. They can be models you can bring in that can help you fight inflation.

Learn more about managing inflation

Be sure to watch the rest of the episode to discover other helpful tips Chandrashekar gives LSP on dealing with inflation.

If you enjoyed this presentation, be sure to check out the following articles that will help you unravel how inflation affects small businesses and how to protect yourself from it.

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