Five Ways Smart Businesses Can Drive Greater Efficiency Amid Rising Costs
Whether it’s the cost of energy in Europe or inflation in the US, the cost of doing business is increasing around the world. The International Money Fund’s July 2022 World Economic Outlook expected growth to slow to 3.2 percent. Coupled with the numerous disruptions affecting supply chains, managing businesses of all sizes through these uncertain times is no small feat.
Headlines dominating news cycles are enough to induce panicked reactions such as raising prices or cutting into profit margins. These may very well be the eventual moves needed to weather the current economic climate, but it’s important to understand that there isn’t anything a business can do to stop these macro-economic trends.
What businesses can do is take a close look at what is within their control—and optimize.
One size does not fit all
Small and medium businesses (SMBs) are dealing with rising costs at different stages of preparedness, or none at all. This makes things, such as inflation, personal as the impact on a local retail shop will be different than that of a textile manufacturer.
These complex business challenges call for a more nuanced approach. Here are five areas that deserve close attention as SMBs look to optimize their business strategies and find opportunities in a volatile economy:
- Get a clear view of your data. Having data is one thing, gaining insights from it is another—and essential to understand how rising costs impact your business. This is a common pain point for businesses of all sizes that struggle to find the value in their data. Pinpointing where incremental changes can be made can have a positive impact on a business’s viability. Look to technology solutions to manage data efficiently and unearth the business insights that matter.
- Make sure your money is working for you, all the time. Capital expenses typically reduce flexibility and are limited to a regimen of depreciation to reduce your taxable profit. Switching from capital to operational expenses can open up more opportunities to be invest in daily operations or even acquiring new customers. For instance, instead of purchasing a car, many rely on transportation-as-a-service apps—such as Lyft and Uber—and pay as they go. Then they don’t have to worry about maintenance, parking, insurance, and many other car ownership related expenses.
- Review business processes. Examine high-value vs. low value procedures and tasks. Automation can help you ease operating costs. Ensure that resources are allocated to what matters. Put people to work on essential tasks, and digitize the rest for efficiencies.
- Understand the inflation drivers in your field. How will they impact working capital? The answer will help you prioritize precise decisions and optimize your business in the short term. For instance, if it’s rising fuel prices, explore ways to decrease use such as combining shipments and controlling inventory, or perhaps locking in contracts at more reasonable prices. Regardless of the exact solution, it will be different for the retail shop than it will be for the textile manufacturer.
- Find out how your customers are being impacted by inflation. This understanding usually comes through increased communication. Check in and see if they are struggling—a little bit of flexibility goes a long way in supporting them, such as shifting accounts payable to 45 days versus 30 days. Transparency goes a long way during uncertain times. For instance, a construction company may tell its vendor that they are not going to raise prices, but they will need to change the payment terms. During times of inflation, prices rise quickly and fall slowly, despite signs that the economic tide is turning. To differentiate from competitors, companies can lower their prices faster—the delta between how fast you and your competitors rise and lower prices might make all the difference to win more customers.
As business leaders look to mitigate the impact of rising costs, inflation and other disruptors, consider flexibility and empathy to help retain existing customers, maintain trust, and find creative avenues to capture new customers. And lastly, though certainly not least, take care of your employees. They’re the engine of your business. Ensure they have the access to systems that allow them to work efficiently and seamlessly—from anywhere—during these uncertain times.
Learn how you can transform your business by joining the AWS Connected Community, a place where you can find flexible, on-demand resources for SMBs. On the Connected Community, you can learn more about how you can adapt Amazon’s Day 1 culture into the work you do. Contact us if you prefer to speak with an expert.