It’s darn near impossible to go anywhere and not run into a news segment, article, or conversation about inflation. Make no mistake: it is an issue that not only affects your grocery bill but is also having a much bigger impact on your business than you may be aware. The truth is that inflation impacts you, your business, your team, vendors, and clients.
Let’s start with you because of your impact on every other group mentioned. The truth is that your attitude, beliefs, and expectations will affect everyone you encounter. If you’re scared and worried about the repercussions inflation will have, it will infect your team, your clients, your vendors, and your business. However, if you are positively focused, determined, caring, and calm, you will be like a lighthouse to a ship tossed in the storm and bless the people around you who desperately need a break from the negativity.
Let’s move on to your business. Why is your level of positivity and confidence a big deal? Because fear makes you shrink. You stop thinking about growth and start thinking about survival. You don’t focus on helping your client; you’re completely focused on keeping food on your table and not going out of business. This new focus causes you to expect less, do less, and get less, reinforcing your negative outlook, causing you to expect and do even less the next go-round. Before you know it, you’re laying off your team and cutting expenses wherever you can. But it doesn’t have to be this way. You showing up positive and certain makes all the difference. Yes, you will need to adapt to the current economic climate. Depending on the market you serve and the impact inflation is having on them, you may need to defer maintenance, break up repairs over time to help with budgeting, and should offer prime and subprime financing options. The key is that you still expect a “win, win, win” for your client, your team, and you.
Inflation quickly erodes profit, so make smart pricing decisions
As a business owner, you need to make smart decisions right now regarding pricing because inflation quickly erodes your profit. How? Your buying power is drastically affected by inflation. What cost you $100 in January 2019 now costs you $117.91 in December 2022! Inflation silently eats away at your profit if you're not paying attention. If you increased sales by 5 percent in 2022, you actually lost 3 – 4 percent in profit. If your profit falls within the 5 – 7 percent national average, you’re hurting at 2 – 3 percent profit! If you had 10 percent growth in 2022, congratulations! (NOT!) Because you didn’t grow. Your sales increase was due to inflation. It’s critical that you maintain your profit margins. A great website to monitor inflation for your adjustments is https://data.bls.gov/cgi-bin/cpicalc.pl.
Let’s talk about your team next. Not only is the doom and gloom of inflation and impending recession from the news shaking their emotional stability and foundation, but they also have a harder time making ends meet. Instead of focusing on performing quality repairs and taking amazing care of your clients, they’re worried about how they will survive this downturn. It’s important that you bring your positive mindset to work each day, reassuring them that everything’s going to be okay. You should also be giving each one of your team a cost-of-living increase. Notice I didn’t say "raise." Raises denote an increase based on performance. A cost-of-living increase is tied directly to the inflation rate, so they have the same buying power today as they did when you presented their wage plan to them. At the beginning of 2022, I recommended that my clients increase their labor rate by 10 percent and give each team member an 8 percent cost-of-living increase. Why is this important? When a member of your team is running out of money with month still left, many times, they start looking around to see what else is available that will pay more. We all know how hard it is to replace someone today, right?
Adjust your labor rate for inflation
Do you have a process to adjust your labor rate regularly for inflation? I have some shops that adjust their labor rate annually, semiannually, quarterly, and even monthly. The frequency isn’t as important as the process. You don’t have to worry about your parts when discussing inflation. I’ll talk about that in just a bit.
The last group to consider is your vendors. As an industry, beating up your vendors and techs is common practice to make a profit. That needs to stop NOW! It’s time to stop wasting 20 minutes shopping around for the cheapest part and instead, be loyal to the one vendor in your market that cares about the quality they sell and servicing their clients. That would be you. While you don’t have to be concerned about having an inflation strategy for parts, your vendor does. Their buying power is eroding just like yours. Give them room to make a profit; it will serve everyone in the long run. When I had a shop, I told my primary parts vendor to charge me 10 percent more than any other shop with my volume, provided that I was the first delivery every time. He loved it, and so did I. Getting vehicles turned around more quickly was more important to me than a couple of bucks. I don’t know about you, but I get tired of tripping over dollars to pick up pennies.
You don’t have to worry about having an inflation strategy for parts because you have a matrix you use to price your parts. When the cost of your parts goes up, your matrix ensures you’re still making a profit. Fun fact: You make more money when you sell more expensive, better-quality parts!
Inflation is a moment in time that can be successfully navigated
Inflation is a moment in time that can be navigated with a positive mindset, a smart strategy, and a clear understanding of its impact on your business. By addressing your own beliefs and expectations, making informed pricing decisions, supporting your team, and maintaining a loyal relationship with your vendors, you can counteract the profit erosion caused by inflation and continue to grow and thrive, even during challenging times. For more information on when to give raises to your team, visit 180biz.com/raises and sign up for a popular webinar that walks through the seven triggers of a pay increase process. I believe the lesson buried within these times is that it's important to stay up to date on economic trends to adjust your strategies as needed. This will help ensure that your business is prepared for changes due to any economic climate and that your clients, teams, and vendors are taken care of and supported. With the right attitude and strategies, you can ensure that your business is ready to weather any storm and ultimately come out ahead.
