Table of Contents
How Will SME Businesses Survive from Inflation in 2023?
Small businesses are under pressure from inflation to either raise prices and risk losing sales or accept loans to cover some expenses in order to retain their profit margin.
Over 80% of small businesses have increased their prices since the pandemic in an effort to stay in business, and some have been forced to make drastic cost-cutting choices.
In addition to the poor profit margins caused by cost increase, small businesses that operate across borders have also had to cope with the increasing exchange rates as a result of anti-inflationary measures.
Anti-inflationary measures also increase cross-border taxes and tariffs, making imports and exports unfavorable for small businesses.
This article explains the impact of cost increase on small businesses, especially those involved in imports and exports.
1. Higher running costs
Small businesses will have to spend more money on the supplies they need for their businesses. For small businesses involved in imports and exports, this means higher shipping costs and tariffs on international sales.
Domestic costs are also rapidly increasing, especially in energy and electricity charges, which are the major drivers of cost increase. 73% of small businesses have said that increasing energy costs are negatively affecting their profits to a large extent.
Rising costs also create a cash flow problem for small businesses, making it harder for them to meet their short-term obligations. A report published by SCORE showed that rising costs are posing extreme difficulties for 35% of small businesses.
2. Market uncertainties
Even experts are unable to predict the direction of cost increase, whether there will be a sharp increase in line with higher pay demands by workers and consumers seeking to maintain their purchasing power, or a decrease in accordance with lower spending.
Your only choice is to plan for potential outcomes and implement strategies to deal with inflation.
3. Fluctuating exchange rates
Exchange rates will certainly fluctuate during cost increase. Depending on the anti-inflationary measures in your country, your domestic currency can either weaken or strengthen against that of other countries.
If your currency is strengthened, you would be able to import more, but your international sales would likely drop.
4. Higher tariffs and taxes
Increased taxes may be used to reduce inflationary pressures as taxes lower disposable income, which reduces demand.
While this is helpful for the economy, it could be horrid for small businesses because they tend to be less stable and have a lower chance of surviving long enough to enjoy the benefits of this anti-inflationary approach.
5. Supply chain disruptions
Supply chain disruptions were one of the challenges during the pandemic, which also added to the increased prices of goods and services.
However, these disruptions have been sustained, and the current cost increase makes it worse for small businesses, reducing their purchasing power and inventory levels and causing them to slowly wind up.
How Can Small Businesses Survive Rising Inflation?
Inflation is an external threat to the survival of small businesses. While you, as a small business owner, can’t do much to influence the level of cost increase, you can employ strategies or techniques that would help you cope with the rising inflation levels.
Some of these strategies are:
- Analyze your business cost structure
- Automate processes to improve productivity and efficiency
- Analyze profit margins
- Take measures to improve your bottom line
- Stock up on supplies
- Long-term contract with suppliers to lock in the price
- Increase your customer acquisition strategies
- Diversify revenue streams
The best strategy to deal with inflationary pressures may be to use e-commerce marketing. Online marketplaces make it easier for small businesses to minimize costs without compromising quality. One of these is Alibaba.com.
Alibaba.com is a superb cross-border selling platform known for its inclusion of and support for small businesses. Its sellers receive more than 400,000 sales requests every day and have more than 40 million active buyers from 200 different countries and regions.
Alibaba.com is a business-to-business marketplace. As a result, you could sign contracts with five companies that would each purchase at least ten products rather than attempting to sign agreements with ten clients who would each purchase just one or two things.
Alibaba.com provides small businesses with additional advantages, such as a classic no-code storefront where they can easily display their products for customers to choose from, in addition to helping them to cut operating costs. Open a seller account on Alibaba.com to enjoy these and a lot more.
Access the Global market through Alibaba.com today! Do not hesitate to approach us. Contact us for more information now!