As a small business owner, your profits are everything. After all, it takes most small businesses a while to even start making a profit. That’s why you’re always aware of the factors that can potentially cut into them, like inflation and an ever-increasing minimum wage.
At CSI Accounting & Payroll, we’ve helped small businesses with their finances year-round for over 50 years. We’ve also spoken with thousands of prospective clients who have these profit concerns:
There are lots of different aspects of inflation. Hard financial times can mean supply shortages, difficulties finding quality workers, and a variety of other environmental factors that your business can’t control.
When you consider those things, you might think that different industries are hit by inflation at different times. However, inflation is fairly consistent across the board.
If we’re strictly talking about inflation and not those other factors, then every industry is affected. Everyone uses common goods to operate their business, and all of those are affected by inflation.
In some states, small businesses have specific minimum wage laws to help maintain a small profit margin. However, just like how everyone is affected by inflation, everyone is also affected by minimum wage – and both decrease your profit margins.
How do you handle that? By not ignoring it. Not paying attention to the things that affect your profits is an issue. When your hard costs go up, you need to adjust your sales prices accordingly – otherwise, your bottom line suffers.
Many small business owners hesitate to raise their prices because they’re concerned that it will deter purchases. However, we believe that your prices should always increase by at least the rate of inflation.
Why? The small businesses that are surviving are also raising their prices to combat inflation and increasing minimum wages. It’s head trash to think that your business is different and that many people will be deterred by your prices alone.
Even if you do have customers who leave over a small price increase, you shouldn’t be concerned. Those types of customers can leave you for any reason and aren’t loyal to anyone if they’re just hunting for the best price. If you provide good service and are reliable, you will be alright.
If you fail to raise your prices and protect your bottom line, your cash flow can also suffer. If you’re not prepared for increased prices of common goods and beyond, how will you be able to pay for them when the time comes?
What is a reasonable profit margin for small businesses? We tackled this in a recent article about what you need to boost your profits and how a monthly accountant can help you.
A good profit margin depends on a number of variables, including:
For other ideas on how to increase your profit margins, partnering with a monthly accountant can offer a personalized, year-round experience. Learn more about the different types of advice that a monthly accountant can offer you by clicking the image below:
Now that you know that all industries are affected by inflation at the same time, you can get through tightened margins by raising your prices, and profit margins vary mostly by industry and a few other factors that a monthly accountant can help you examine., are Are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what it’s like to work with CSI Accounting & Payroll by clicking the image below: