Capital / Cash Management

Feeling the squeeze of cost pressures? These 4 fixes can help

Rising Costs

There’s a downside to a good economy. When economic growth accelerates too quickly, it can cause inflation to rise and costs to spike — which, in turn, can squeeze margins and threaten the profitability of companies.

Vistage Decision factors: HR 2018 report
Download report here

That’s certainly true at the moment, as small and midsize businesses are feeling cost pressures from every angle. Interest rates are increasing and expected to grow further. Energy costs are surging, while new tariffs and trade policies are stressing supply chains and driving up raw-material prices. Worker shortages and talent wars are also causing wages to rise.

According to some economists, this trend is likely to continue in the months to come. Dr. Richard Curtin, a Research Associate Professor that studies consumer confidence as a key economic indicator at the University of Michigan, has warned that wages, commodities and interest rates are all projected to keep edging upward through 2018.

As the CEO of a small or midsize business, try these four things to ease the pressure:

1. Raise your prices.

Your customers may not like it, but raising your prices is a necessary evil to maintain profitability. This is particularly true if you’re running a midsize company; you’ll need to think strategically about the costs you can pass on to consumers and the costs you can pass on to other intermediaries. Be assured that many companies are already on this bandwagon: Research from Vistage indicates that about half of CEOs (56 percent) from small and midsize businesses plan to increase their prices in the next 12 months.

2. Talk with customers about their long-term plans.

Price conversations can actually strengthen your relationship with customers if you approach them the right way. Use these conversations as an opportunity to have an open discussion with your customers about their long-term plans and goals. Explore what barriers stand in their way and offer suggestions on how your business can help problem-solve. If you’re transparent in your approach, you will build trust with your customers and improve your relationship for the long term.

3. Use technology to lower costs.

Thanks to the advent of cloud computing, you now have access to a whole host of cloud-enabled software options that can boost your company’s productivity and lower its costs. For example, some Customer Relationship Management vendors are integrating new capabilities into their solutions to enable marketing automation, email marketing capabilities, web conferencing, project management and more. Meanwhile, Enterprise Resource Planning vendors are offering new systems that can be implemented quickly and cheaply. These kinds of solutions used to be too expensive or complicated for small and midsize businesses, but not anymore.

4. Restructure your debt.

If you haven’t yet restructured your debt, do it now. Admittedly, the best prices are behind us, but this is likely your last chance to get a decent price.

Rising costs aside, this is still a good time to be in business. The majority of CEOs from small and midsize businesses continue to be optimistic about their growth prospects, as indicated by the Q2 2018 Vistage CEO Confidence Index which is close to its 10-year high (104.1).

The index was calculated by measuring the opinions and projections of 1,467 CEOs of small and midsize businesses about the economy, hiring, investment plans, and prospects for revenue and profit growth.

Read the original post on

Read the report, Decision factors for H2 2018: Economic considerations for SMB executives, to discover the top decision factors and recommended actions for SMB CEOs in the second half of 2018.

Category: Capital / Cash Management

Tags:  , ,

About the Author: Joe Galvin

Joe Galvin is the Chief Research Officer for Vistage Worldwide. Vistage members receive the most credible, data-driven and actionable thought leadership on the strategic issues facing CEOs. Through collaboration with the Vistage community of…

Learn More

Leave a Reply

Your email address will not be published. Required fields are marked *