SURVIVING INFLATION AS A STARTUP IN NIGERIA
Introduction
Emeka is a business man. He imports goods from America and sells them locally. Lately, Emeka has been frustrated by the constant hike in the cost of importing goods as a result of the fall of the Naira against dollar and his business is going through a rough patch.
Are you a business owner in a similar situation as Emeka?
Prices are rising, supply chains are still shaky, and customers are watching their pennies closely as their lifestyles get more costly. So, how can startups and small business owners prepare to weather this inflation times?
Economically speaking, Inflation is the general increase in the price of goods and services and the fall in the purchasing value of money.
Inflation can be caused by an increase in the demand of goods and services with a decrease in supply or lack of increase in supply. As a result of this, there’s a drastic hike in the price of products and services because of the limited availability and the increased need for these services and products by more people.
As a startup/ small business owner what are the measures you can put in place to thrive despite this harsh economic situation;
Understand your supply chain
First and foremost, be aware of your whole value chain and its vulnerability to supply chain disruptions. To put it another way, learn about your immediate supplier as well as the supplier behind your supplier, and so on. At each stage, assess the danger of an interruption, create alternative sources of supply, and maintain adequate inventory.
Reorganize your debt and borrow wisely
Understand your capital structure, including the percentage of equity, preferred stock, bank loans, short-term credit, supplier credit, and convertible debt you have. Determine which ones must be repaid and when, which are affected by interest rate rises, and which could put your company at risk if you default. Financial strategies that were successful in the previous decade may be overly hazardous in years to come. Restructure your debts, open new lines of credit, and keep a sufficient reserve.
Attention to International policies on trade
Pay close attention to global changes, realignment of country alliances, and shifts in international supplier policies.
Keep an eye on the regulations and laws that may affect you as a business owner/startup. Some of these laws or regulations when properly implemented may be beneficial to you as a business owner, and so seek proper guidance from legal practitioners on how to fully exploit these provisions to your benefit.
Keep your employees happy by maintaining strong morale:
Employee retention must be part of your inflation-survival strategy. If you start losing workers now, you’ll expend more on advertising open positions, hiring new workers, training them, onboarding them, and getting them up to speed. All the while, your ability to meet customer demand will suffer.
When you lose a critical employee, you lose months of output and you have to put in extra work to identify and train a worthy replacement. As a result, it's critical to maintain frequent communication with your employees and, at the very least, be aware of how the inflation affects them. Allow employees to work from home where feasible or adopt an hybrid structure of work, as this will enable them cut down some costs especially in the instance where their salary is not increased. find out what they want in terms of perks, benefits and scheduling, keep them happy and keep them showing up.
Restrategize
The luxury of exploring unprofitable ideas is no longer available. Because short-term survival takes precedence over long-term growth, it's time to rationalize operations, consumers, businesses, brands, segments, suppliers, manufacturing facilities, and product lines. Return to the drawing board to identify core areas and concentrate on those that deliver the best returns for finite resources while also holding the most potential for the future.
Leverage on Technology
Leveraging on Technology and automation have proven to be useful during times of crisis, in general, not just when inflation is high.
A research carried out by Harvard Business Review found that businesses that invested in AI and automation just before the pandemic weathered 2020 and 2021 better than those that did not.
Some of the ways you can leverage on technology are as follows
Workflow Automation
Real Time Data Analysis
Cybersecurity
Project Management
Tracking KPIs
For insights on how you can leverage on these technological tools see our article on HOW TO LEVERAGE TECHNOLOGY FOR YOUR BUSINESS.
Invest in Assets
Investing in assets is a wise way you can survive inflation as a business owner. For instance, where you purchase real property, at the point of selling such an asset, it would’ve accrued so much profits that will prove useful to your business when funds are required.
Inflationary pressures and supply chain difficulties are real and here to stay, there's no way around it. It's critical to gain a thorough understanding of these issues and devise a strategy for dealing with these rapidly changing concerns.