- Rising Inflation & Interest Rate Hikes – The Federal Reserve forecasts multiple rate hikes in 2022 as inflation reaches its highest levels in four decades (7%), increasing the cost of goods and operations.
- Passing Costs to Customers – Businesses must raise prices to maintain profitability, as consumers are already accustomed to rising costs in essentials like food and energy.
- Financial Strategy for Businesses – Securing a line of credit can help stabilize cash flow and provide a buffer against inflationary pressures and rising operating expenses.
The federal reserve just lowered its growth forecast and raised its inflation expectations for 2022. Finally, the central bank also sees the potential for seven rate hikes this year.
Inflation in 2021 was the highest in four decades: 7 percent according to the Consumer Price Index or 5.8 percent according to the Personal Consumption Expenditures index. As the new year dawned, economists hoped and expected that we'd be able to get inflation back under control in 2022.
So what does this mean for Main Street? It means that supplies and inventory (goods sold) are more expensive. As a business owner, you are seeing an increase in the cost of everything. This increase in cost of goods and general operational costs means one thing. You must raise prices now. The business needs to pass these cost increases onto the customers.
Consumers are begrudgingly becoming accustomed to increases from everything to food and energy, so why would your goods or services be any different? It’s easy to argue that your ‘customers won't be happy’...but the alternative is that if your business doesn’t increase prices, you won’t have a business anymore.
A great tip is to remember that you don’t necessarily know the motivation behind buyers. There are different levels of need that each of your customers possesses. Many may value your goods or services so much, that they will not notice the price increase, or for that matter care.
PRO TIP: To weather the inflation storm, accessing a line of credit can prove invaluable to a small business owner. To see the qualification requirements, download this document.
