Business growth strategies for finance leaders in a high-inflation environment

In recent years businesses and individuals alike have had their fair share of financial uncertainty as they grapple with a succession of unexpected events. First Brexit, then coronavirus, and then a devastating war in Europe.

As a result, companies are now feeling the pinch of extra high inflation. And while the rising cost of commodities shows little sign of slowing, finance leaders and business owners – many of whom have not led in inflationary times – are faced with a new set of challenges.

This article highlights practical and strategic measures you can implement to weather the effects of inflation and achieve growth.

Protect and develop talent

In a tight labour market, retaining your most important asset – your employees – should be number one. Losing a valued employee can take months to replace and, where time and resource is money, will incur costs. Investing in your workforce by upscaling and re-training will incentivise talent to stay, even in tough times.

Creating a meaningful culture with attractive benefits is imperative in preventing talent from moving on in today's world. Companies may choose to incorporate periodic salary reviews to stay on top of competitor employers.

Quickly adjust prices and promotions

Developing the art of price change is a valuable method of adapting to inflation. When commodity prices rise, and supply chains are disrupted it’s easy to push up prices for your clients and customers. But how do you do this whilst being price-sensitive and remaining competitive? Instead of making extensive increases across the board and consequently losing customer trust, companies can tailor their prices according to customer and type of product – all while acting fairly and taking customers’ interests into account.

By harnessing dynamic business data, you can segment customers based on their cost sensitivity and profitability and make thoughtful price increases for consumers who can absorb them. Remember you will need to stay competitive in the market, so where possible, consider the elasticity of demand and pass on price changes accordingly.

Make the most of your cash reserves

It is likely that companies will hold cash reserves as a safety cushion whatever the circumstances. It’s a good idea for businesses to hold some cash during a period of inflation, but if you’re leaving it to languish in low-paying accounts earning mere pennies, inflation will be quickly eroding it away. As central banks increase interest rates, inactive cash in high-street accounts becomes more expensive for your business.

Consider working out what you can lock away with market-leading interest rates to grow your interest income and take advantage of higher rates across the board. See how Flagstone can make depositing business cash reserves seamless.

Prioritise high-profit margin products

Businesses that pursue non-pricing levers in addition to cost changes are more likely to succeed through inflation. And if hiking up prices is simply not a viable option, giving priority to the most profitable products can be an alternative solution. Many companies prioritise based on the order date regardless of profit margin, however, this approach is not always the best in the early periods of inflation. If possible, extend the lead time for low-profit margin categories and suggest other products can be shipped quicker.

For B2B tech services, prioritise the most valuable leads first. Negotiating a ‘more for more’ arrangement or locking in a mutual benefit for the business and customer can also effectively hedge margins on both sides of the equation.

Invest in digital

A finance leader’s instinctive reaction to inflation may be to cut back on costs and pause spending. Yet investing in the right technology can reduce the cost of business, allowing you to charge your customers less and stay competitive. When the labour hunt is tough, best-in-class companies might accelerate their focus on automation and digital solutions to streamline processes.

Technology can not only increase the productivity of the finance function and lower labour costs, but it can also improve business insights. Better data leads to better decisions, and better decisions lead to growth.

Leverage inflation to close deals

When inflation is expected, consumers might spend their money early while prices are lower or stockpile products, so acting quickly on your pipeline and using the issue of price rises in the future as a selling tactic could see your business bring sales through the door. Some customers will choose to commit today at a lower price than tomorrow at a higher price.

Continuing to focus on the business’ core USP is essential during times of inflation – if the quality of the product or service you deliver meets expectations, general sensitivity to prices fades.

How Flagstone can help curb inflation

Improving your business cash position is a good way to tame the impact of inflation, take advantage of higher interest rates, and continue in your endeavours towards growth.

It’s difficult to know what to do with business cash and where to find the time to manage it. The Flagstone platform provides your finance function with access to a wide range of business savings accounts all under one roof. As a result, your company can save time shopping around and applying for different accounts, whilst also benefitting from exclusive interest rates to grow reserves. Contact us to find out more.

Read more: interest rate raised to highest level in 13 years