New Zealand’s inflation pressures are set to stick around for a while. For business owners, it can feel like one more challenge to overcome after a tough few years. The United Nations' 2024 World Economic Situation and Prospects forecasts that inflation will drop, but much more slowly than many would like. So, how can you find your way past the headwinds and bring your business through to easier sailing?
The first step in weathering high inflation is to have a clear picture of your business expenses and review them regularly. Costs have risen for many goods and services, so check that everything you're paying for still makes sense for your business. It might be time to renegotiate with suppliers or embrace lean inventory practices. For ideas on how to cut costs without compromising growth, check out our earlier blog.
Cashflow is a lifeline
During inflationary times, good cash flow management can be a lifeline. Forecasting tools can help you stay ahead. If you’re really in a pinch, it may be worth exploring different finance options or lines of credit with someone who has experience and knowledge. If numbers are not your area, seek out unbiased guidance – someone with your best interests at heart. A Business Mentor won’t give you financial advice, but they can help you think about how to find it and what to look for.
Invest wisely
If you need to make investments in your business, prioritise those that cut costs, enhance efficiency, or open new revenue streams. This may not be the time to embark on untested projects that don’t directly drive the bottom line. For example, if it’s not going to have an immediate impact on sales, your refit or rebrand my need to wait. On the other hand, you might make a quick win by setting up an automatic follow up for customers who leave something unpurchased in their online cart.
Manage debt with care
In a high-interest environment, managing debt becomes crucial. If you chose fixed-rate financing in the past, you may be seeing the benefits now. When looking ahead, forecasts expect inflation to come down. In the meantime, prioritise repaying high-interest debts to reduce financial strain.
Stay ahead of regulations
You can protect your business from unexpected costs by staying informed about regulatory changes and optimising your tax strategies. A new government means things are being updated fairly quickly. Ask a tax advisor about how any changes may affect your compliance and financial planning. Furthermore, don’t shy away from keeping your own eye out so you can ask questions about the process. The government and Inland Revenue Department issue announcements regularly.
Get the balance right with labour costs
Salaries are under the spotlight as New Zealand’s cost of living remains a concern for many. Additionally, some skilled labour is in short supply. To ensure your payroll dollars are working as hard as they can, look for strategies such as performance-based pay. This can give both you and your employees more.
Set a smart pricing strategy
When inflation is lifting your costs, you’ll probably need to consider how you’ll pass these on to retain your margin. If you change your prices, be upfront and communicate increases with confidence and empathy. People appreciate transparency, especially when it's about something as sensitive as their wallets. Consider gentle, incremental price adjustments to ease your customers into it, or check out our blog on choosing a pricing strategy that’s the right fit for you.
Fortify your supply chain
Diversification is your best defence against supply chain disruptions. Cultivate relationships with multiple suppliers, including local options, to safeguard against shortages. For critical inventory items, consider a strategic stockpile, but weigh this against storage costs.
Continued high inflation may be daunting, but Kiwi businesses are resilient and creative. And if you’re thinking about how to succeed, even after the turbulence of the last few years, you’ve already proven yourself to be proactive and adaptable. Being thoughtful of your cash flow, debt, and investments gives you a reliable foundation. You may need to make decisions about labour costs, pricing and tax strategies, but you don’t need to do that without support. Our volunteer Business Mentors have experience, insight and compassion. They’re a sounding board to help you clarify your thinking, find connections and determine your next steps. Find your match today, and you'll benefit from having someone walk alongside you.
