Last year, Nigeria experienced a near-unprecedented rate of inflation. Nothing much has changed this year. According to the National Bureau of Statistics, in July, the annual inflation rate soared past 24%, the highest rate since 2005. And it may get worse: the World Bank projects inflation will reach 25% before 2023 is over.
One of the adverse outcomes of this high rate of inflation is its erosion of purchasing power — for both individuals and businesses. Naturally, there will be complaints.
In a relatively poor country that has just witnessed an increase in the price of petrol, the pressure on the population is substantial. What can be done at the level of small businesses?
How can small businesses survive inflation?
Tough economic situations demand even tougher decisions. Here are a few strategies that will help small businesses push past inflation-induced difficulties.
1. Revise prices
This is perhaps the most obvious strategy of all. But it comes with its own complexity, given the reality of Nigeria’s multidimensional poverty. Nonetheless, this is an important step to take. Increasing prices might become inevitable.
The goal of business is profit, so small business owners will have to find the sweet spot between making a profit and meeting the purchasing power of their customers. As production costs increase, reviewing prices without compromising on quality will become crucial.
2. Cut down expenses
Review your spending and find a way to cut down on expenses anywhere you can — these things tend to add up. This could mean moving the business to a cheaper location, cancelling subscriptions to products that are not strictly necessary for business operations, or finding less expensive suppliers.
3. Make cashflow a priority
Without cash to pay suppliers or reinvest in (or for the benefit of) the business, many small businesses will fail. To avert failure, business owners must move from selling items or services on credit to ensuring customers pay immediately or even in advance.
This strategy will keep the lights on longer and maybe until such a time when things return to relative normalcy.
4. Seek out funding opportunities
The injection of adequate funding into small businesses has facilitated the exponential growth of those businesses. Fortunately, there are different ways to raise funds for business. It helps for business owners to know that there is such a thing as good debt.
This ought to encourage entrepreneurs to seek out loans from institutions at a good rate, if at all necessary. Some bodies also offer grants that do not have to be paid back. The savvy business owner will take advantage of such funding opportunities.
5. Market the business
There’s never been a better time to tell the world about the positives of using your products or services. Small businesses may not have the budget for more traditional marketing methods, like billboards or TV adverts. Thankfully, there is social media, upon which marketing can be cheap and effective.
6. Diversify income streams
Small business owners can find other creative ways to make more money. You can go the passive route by investing in other businesses or chart the active course by starting a new business. You don’t even have to leave your comfort zone to do the latter; as a food vendor, you can begin to teach masterclasses to aspiring cooks.
Leveraging the reach of social media can earn you a large following, which could then attract brands that will pay you to promote their products.
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