Have you ever woken up in the middle of the night to get a glass of water and stubbed your big toe on the nearest table? Well, inflation is kinda like that. Except instead of hurting your toe, it hurts your bottom line. It also hurts your ability to get supplies, ability to pay your vendors and employees, sales, productivity, and, and, and… And to make matters worse, the pain of inflation lasts much longer than a couple minutes of toe throbbing.
I suppose you could say inflation hurts a *bit* more than stubbing your toe, and this past year hasn’t been the easiest for countertop fabricators to bear. In the past twelve months, the U.S. inflation rate has been just over 9%, which is the largest increase in the past 40 years!
But that doesn’t mean there aren’t ways to make it hurt less. Here are a few tips you can use to help your countertop fabrication business grit its teeth and get through these tricky times. Yay for positivity!
Tip 1: Know the difference between strategic and non-strategic spending
The knee-jerk reaction to stubbing your toe is to jerk your knee. The knee-jerk reaction to inflation is to cut spending anywhere and everywhere you can. While this might seem like the most rational method to reduce spending, it’s actually not the best way to fight inflation.
The key to combat inflation isn’t to cut spending across the board; it’s to cut spending strategically. And with that in mind, it’s important to know the difference between strategic and non-strategic spending:
- Strategic spending – An expense that will yield an immediate profit or one that strongly protects profit.
- For example, it might seem intuitive to cut labor to reduce expenses. But if you have a rockstar fabricator at your shop who consistently produces high-quality work, it might actually hurt your productivity to reduce their hours. By keeping them at full capacity, that’s a strategic expense that will work better for your bottom line in the future.
- Non-strategic spending – Expenses that don’t bring immediate profit.
- A great example of non-strategic spending would be that Facebook advertising campaign you just can’t seem to get off the ground. If it doesn’t show value, it needs to be gone. However, if you have some form of other marketing that has proven itself time and time again, that would count as strategic spending.
Under normal circumstances, it’s good for businesses to have both strategic and non-strategic expenses. After all, you never know if a non-strategic expense will work out until you try it. But when the inflation comes down and things get tight, understanding the difference between strategic and non-strategic spending will help you know how to cut the right expenses.
Tip 2: Reevaluate your overhead and standard costs
If you’re like most businesses, you might check your standard costs and overhead rates annually or less. However, in times of inflation, you never know when prices are going to spiral out of control. If you’ve filled up your gas tank lately, you know what I’m talkin’ about! It’s a good idea to reevaluate your overhead and standard costs more often to reflect the inflationary periods.
Readjusting your costs help you stay on top of pricing. Doing this more regularly will help you and your customers better adjust to inflation. No sticker shock or negative feelings when purchasing.
Tip 3: Keep reducing reworks
If the cost of production has inflated, so has the cost of reworks. Terrible news, I know! Reworks are already expensive enough. When inflation rolls around, they only get worse.
Industry experts say the average countertop business has 10% of its money tied up in reworks. When things get tight, this 10% is much better used elsewhere.
Implementing more efficient processes and quality control measures costs time and money, but it’s definitely worth it to reduce those costly mistakes. Especially during a time of inflation and with a looming fear of a recession in the mix.
💡Tip: Looking for some ideas on how to reduce reworks in your countertop fabrication operation? Check out this super-helpful blog!
Tip 4: Stay on top of outstanding orders
Periods of inflation like these are no time to leave money on the table. Unpaid invoices can quickly interrupt your already limited cash flow and hurt your ability to do business. Staying on top of your accounts payable is one of the most important things you can do to make inflation hurt less.
It’s easy for unpaid invoices to get lost in the shuffle. Orders come and go, customers stop responding, and after a while, you and your team forget about even asking after that invoice and continue with business as usual — minus a few dollars.
You paid for the inflated supplies, the machinery to fabricate the stone, electricity to keep everything moving, and the hours for labor, you worked hard for that profit! Although it might take some time, keeping up with unpaid invoices is one of the key ways to combat inflation.
Assign someone to keep track of payment statuses. This way not one dollar falls through the cracks. Then, send a few emails or make some calls to customers and vendors to get the money you’ve earned.
💡Tip: If you use CounterGo, it’s easy to check outstanding balances for both unpaid and partially paid invoices by adding a quick filter by Payment Statuses.
Can software help?
I know what you’re thinking: “If the best way to make inflation hurt less is to track all this data like outstanding invoices, operating costs, reworks, and spending, where the heck will I find the time, money, and manpower to manage all this information!?” And I’m glad you asked!
Software is like the secret weapon to making inflation hurt less. When your countertop fabrication business utilizes the right software, you’ll have access to all the data and information you need to make strategic and effective business decisions.
For example, Systemize software allows you to track your jobs and manage your schedule to reduce the need for expensive reworks. Using this software, you and your team can reduce the miscommunication and waste that results in headache-inducing mistakes…during an already headache-inducing time!
Simply put, the right software can help you streamline processes, reduce errors, cut back on labor, and give you all the data you need to make effective business decisions… and survive inflation.