The Real Secret Why Inflation is Good for Your Business
In this video, Brendan Mills flips inflation on its head and shares why you should be embracing inflation.
Because inflation isn’t all bad news. You might hear about prices increasing — fuel, coffee, TVs, cars — everywhere in the media. But as a business owner, this can be great news for you. Why? The constant exposure to price hikes trains your market to expect increases, and that’s something as business owners we can use to our advantage. We need to make sure our price hikes exceed the rising business costs due to inflation.
To make this work, let’s first understand why prices go up.
There are two primary reasons: the inflation-driven rise in production costs, and the real or perceived quality of your products or services. The responsibility for these price changes is divided between different areas of the business.
The quality improvement or perception of the product is up to the marketing and operations teams. They work to enhance the product, making it better, and hence, more valuable. This can result in price hikes regardless of inflation.
On the other hand, the cost increase is in the domain of your finance and sales teams. Your finance team needs to stay on top of your costs to produce items, especially in times of high inflation. Meanwhile, it’s the sales team that communicates and justifies these price increases to your customers. It's their job to ensure your clients understand the reasons behind the price rise, even if they might not like it.
An excellent example is how fuel companies respond immediately to any news about rising fuel costs by increasing their prices at the pump right away. Your business should adopt a similar approach, adjusting prices the moment you foresee a cost hike, even if you still have stock or products at the previous price. The value of your existing stock or product becomes more significant with the rising costs, and your business should adjust the prices accordingly. It’s crucial for your finance team to grasp the current cost per unit, and for your sales team to communicate and implement these price increases promptly.
This approach will allow you to manage inflation-driven cost hikes efficiently while passing on the price changes to your clients promptly.
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