The headlines say it all, “U.S. Mortgage Rates Jump again to 2016 High Mark,” “Housing Demand Threatened by Increasing Mortgage Rates,” “Rising Mortgage Rates could Threaten Housing Demand in 2017,” and “Mortgage Rates Jump to a New High for 2016.” Anyone who is paying attention knows we’ve been enjoying a very long run of mortgage rates near historically low levels. But now, those rates are on the rise and you as a business owner, should definitely take notice.
How to Deal with Increasing Business Expenses
The fact of the matter is, the cost of doing business will always go up. Whether it’s the cost of utilities, labor, materials, inventory, or something else, you can expect to pay more in the future. That’s tough because some industries operate with very thin margins. And raising prices in response to increased expenses isn’t always a feasible solution. What’s worse, is it’s not always known forces. Sure, vendors can raise rates, but your business could be robbed, are you prepared for that scenario?
There are only two ways to make more profit in a small business: increase revenue or reduce expenses. While the timing of increasing sales to customers is not always within the direct control of the owner, cutting expenses is. The difficult part is knowing which expenses to reduce that will not affect the ability of the company to grow its revenue. —Intuit Quickbooks
One thing that’s completely inevitable is businesses will have to deal with change. It could be due to fads, a total industry shift, troublesome employees, the local economy, or other factors. But no matter what it is, you’ve got to overcome and adapt in order to stay in business and retain profitability. That’s not always easy, but unless you’re in the unfortunate position of having to call it quits, you need to know how to deal with increasing business expenses:
- Buy now at the cheaper rate. Very few price increases are instituted without being announced beforehand. If you are informed the price of materials, inventory, or whatever else is going to be increased, seriously consider buying a lot now at the current rate before the hike deadline.
- Shop around for alternative sources. Unless you’re under contract, you can always shop around for a less expensive source. Perhaps there’s a new supplier who is willing to give you a deal to earn your business. In this scenario, you both win and it doesn’t cause much disruption.
- Ask for a bulk discount going forward. If it’s not possible or feasible to find an alternative provider, consider asking your current vendor for a bulk discount. Be ready to negotiate and know when to make concessions to preserve the supply.
- Reduce your other operating expenses. Of course, you should always be keeping normal operating expenses in-check. There are a number of ways to save, such as making changes to your insurance, watching utility use, looking for new charges in your banking and merchant services accounts, and so on.
- Consider moving toward a different direction. Although it might be an unpleasant prospect, it could be time to think about moving your company in a new, different direction. Rising business expenses may be an opportunity to take advantage of now or in the near future.
How have you dealt with rising business expenses? What steps did you take to maximize cash flow? What other suggestions do you have to reduce costs? Please comment and let us know!