Inflation can pose a significant challenge for business owners, causing the costs of goods and services to rise and potentially increasing debt burdens. Proactive financial management and debt control are the keys to success in such an environment.
According to the latest census data, there are 3.12 million businesses owned by Black entrepreneurs in the United States, contributing to an annual revenue of $206 billion and providing employment for 3.56 million individuals, Fortune reported in February.
The Bureau of Labor Statistics reports that eight of 10 Black-owned businesses fail within the first 18 months, according to CNBC. So inflationary times can pose even more of an obstacle for Black-owned businesses.
Here are three ways for small business to navigate debt.
1. Keep Track of You Expenses
It only makes sense that the way to budget is to know where you are spending your money. Monitoring your expenses is especially necessary during inflationary times. Observe variable costs such as supplies, utilities and labor expenses. Doing so can identify areas where cost-cutting is possible and reduce your overall debt load. Also try to negotiate better prices with your vendors, Forbes reported.
If you notice spending on unnecessary things — such as lavish client lunches and travel —cut them out, suggests the National Foundation for Credit Counseling, a nonprofit financial counseling organization.
This is the time to scale back on non-critical expenditures.
2. Broaden Your Customer Pool
Relying on a single customer or a few key clients can increase the vulnerability of your business in the face of inflation. Diversifying your customer base spreads risk and reduces dependence on any single source of revenue. To expand your base, you will need to pay close attention to trends in your sector. Find out new things your customers are seeking and provide them.
3. Proactive Debt Management
Don’t just let debt happen; be proactive to counter it. Regularly review outstanding debts and identify opportunities to reduce or eliminate them. Negotiate favorable terms with lenders and creditors to minimize interest rates and fees.
