âInflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair.â -Sam Ewing
Remember when it used to cost $5 to go to the movies? How about gas prices at $2 a gallon? A stamp was 20 cents? Every year prices rise and things cost more money. Thatâs what inflation is all about.
How much better would you feel if you werenât consistently playing catch up with your money?
Here are 6 things you need to address as a business owner when it comes to inflation:
Fighting Inflation as an Entrepreneur
1. Â Every few years, you need to be raising your prices (deep breaths youâre worth it!) so that you can keep pace with rising costs. Â Offer more value added services to justify a price increase. Â Or start by raising prices on new client relationships. Â If you are in a business where you mostly compete on price, offer a premium package where your product or service is not perceived to be a commodity. Without a higher level offering, your prospects and clients wonât view your brand as a higher end solution to their problem.
2. Â If you do not own the building you work in, consider approaching your landlord and ask him/her to extend your lease with no price increase. Â Do this before your lease is up and get ahead of a potential rent hike.
3. Â If your salary is still the same as it was 5 years ago, chances are it isnât enough money to pay your current living expenses. Consider paying yourself a higher salary to keep pace with a rise in your personal expenses. Review this with your tax professional, because a higher salary will most likely increase your tax liability.
4. Â Invest back into your business! Shoot for a rate of return that could be 3 times your original investment. Â For example, if you spend $35,000 a year and hire an employee, try and make $115,000 off of that investment. Â Think of all that time you will save by not doing everything yourself.
5. Â As a business owner, review the policy amounts for your workers compensation insurance and general liability insurance policies. You may need to raise the policy limits to keep pace with inflation.
6. Â Retire later and work part time. Some entrepreneur clients of mine have decided to retire later in their lives so that they can better fund their health care expenses in retirement. Â Â Medicare is on the brink of disaster, and long term care costs are expected to go up by a lot â oy vey. Retiring later allows you to save more money along the way. It also should help you build up a higher value for your business if and when you plan to sell â cha-ching.
Be Smart with your Money
The fewer financial surprises you have the better off you will be. Paying more for the same thing is a hidden surprise that can wreak havoc on your financial plan, especially as an entrepreneur. Beat inflation. Take action. Invest. Raise prices when you can. Make mince meat out of inflation. Add in a little taco sauce, and have me for dinner on Taco Tuesdays.
Justin Krane, a CERTIFIED FINANCIAL PLANNERTM professional, is the founder of Krane Financial Solutions. Known for his savvy, holistic approach to financial planning, he advises his clients on how to unite their money with their lives and businesses.
Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to identify, clarify and meet goals for increasing their business revenue. He works with entrepreneurs to create a bigger vision for their business with education and financial modeling.