Managing Inflation for Small Businesses

Posted on July 5, 2022 by Diana Louiso

With inflation at a 40-year high and the Feds pulling their rabbit out of the hat to battle inflation to slow the economy (raise the short term interest rate) through manipulation of its monetary policy, it may take a recession to bring prices under control. And all this on heels of a worldwide pandemic, employee issues, soaring fuel prices and supply chain woes.

While it’s painful, it’s not new. Inflation can be considered a “by-product” of money. In ancient Rome, when the emperor couldn’t pay his bills, he decreed that the (solid) silver denarius be made as only a copper coin thinly plated in silver. With the coin now having less value (less silver) Roman merchants demanded more and more denarii in exchange for goods and the coin’s intrinsic value declined.

When the American Revolution started, the Continental Congress could not afford to buy weapons, outfit soldiers, and pay for a full scale war…so they printed fiat money — paper money made legal tender simply by government decree. Like Bitcoin without high tech.

Just last March, the U.S. Chamber of Commerce surveyed random small-business owners to discover that 85% of respondents said that inflation is a concern, and 1-in-3 respondents rank inflation as their #1 concern. A full 63% have supply chain issues, and 67% have raised prices in response to inflationary pressure.

The numbers were similar across the country and spared no geographical regions or business sectors — it appears we are all in this together.

Because it costs us more to run our business, we need to raise prices to customers in order to offset the increase, and we must hunker down and accept tighter profit margins to remain profitable over time.

Eventually, business should return to normal. Before it does, here are suggestions from the experts at Forbes:

Resist the urge to wait it out.
Review your gross profit margins on a product or service basis.
Look for opportunities to save.
Have a process to increase prices as needed to maintain adequate profit margins.
Resist the urge to be a martyr.

Be advised to view pricing as a “formulaic decision” — based on target profit margins that are sustainable. The endgame is this: price your goods and services to allow the business to continue to grow and scale.” Adapt, don’t fail.

Growing a Small Business is Like Gardening

Posted on June 4, 2022 by Diana Louiso

We were curious about the timing to make the most of our backyard vegetable garden, and it got us thinking about the similarity between a successful backyard garden and a successful small business. Success in the garden has as much to do with “when” you plant as it does with “what” you plant. Timing is everything. Good timing requires a plan and every plan has steps.

STEP 1. Build a firm foundation.

Raised beds work better because they sit atop the ground, are filled with the correct soil, drain better, and maintain a warmer soil. Because of the smart foundation, plants growing in raised beds have a better chance at success from seed to the table. Is your small business built on as firm a foundation? Is each component of success — product, market, money, and people — contributing to a firm foundation?

STEP 2. Timing is everything.

To make the most of the growing season, we learn which plants can tolerate early spring’s cooler soils (broccoli and cabbage) and which prefer warmer temps (beans and cucumbers). A new employee that appears at first to be a slow learner, may turn into a superstar given nourishment at the right time.

STEP 3. Wait for it.

Growing a garden doesn’t happen overnight, and there’s also no such thing as an “overnight success” in business. Living things have a mind of their own. Employees and customers both refuse to be forced, but are open to persuasion. Stay flexible and willing to make changes. Like in the garden, plants can be dug up and moved around until sunlight or bedding soil inspires them to blossom.

STEP 4. Pull the weeds.

Gardens get weeds because of a) too many spaces unfilled, b) too much mulch, c) too much space between plants, or d) too much water or fertilizer. Those pesky weeds steal nutrients from the soil and block out life-giving sunshine, not unlike an unreliable employee or an irrationally dissatisfied or overly needy customer. Weeds keep the rest of the garden from thriving and spread their complaining or poor attitudes to others.

Gardening requires that we get our hands dirty. It creates an awareness of the present moment and what is happening around us. It’s been said that when we learn to deal with plants, we put ourselves in a better position to deal with people, no matter what we’re growing.

Doing Business in Cincinnati

Posted on May 9, 2022 by Diana Louiso

Owning a small business in Cincinnati is a great decision! We enjoy a consistent growing economy while maintaining a relatively low cost of living. This stable business environment enables startups to focus on their mission, customers, and workers.

Did you know that in the U.S. nearly 1 in 5 business startups fail within the first year, and about 50% after five years? But Cincinnati’s rate of success for startups after 5 years is a remarkable 74%. Some of that success comes from the meteoric rise of tech and medical startups in the Queen City, as well as the Cincinnati business culture coupled with a commitment to venture development firms like CincyTech.

In 2022, Ohio’s minimum wage rose $.50/hour to $9.30 (the federal minimum wage is $7.25). The District of Columbia tops the list at $15.20 while Wyoming takes the bottom slot at $5.15.

Only 18 states have a lower rate than Ohio. See the chart »

Local colleges and universities contribute by turning out well-educated potential employees who choose to stay in Cincinnati because of its family-friendly neighborhoods, outstanding schools, parks and cultural amenities, food and dining, major sports teams, and down-home midwestern values.

Small businesses contribute by supporting other small businesses with similar dreams, values, and goals.

If you are a loyal customer of DLMoney Matters, thank you! If you are still on the fence about whether to offload the anxiety, fears, and burdens of the time you spend on financial, tax, and accounting matters, get to know us. And please, refer us to your friends.