Within challenge lies opportunity. We saw this as the COVID-19 pandemic struck — while so many businesses and restaurants were forced to close, ag retail saw a resurgence of consumer interest. In the current inflationary environment, prices continue to rise at a rate we haven’t seen since the early 1980s and ag retail businesses are once again faced with a challenging predicament. However, there may once again be opportunity for these customer-facing businesses. Read Farm Credit East business consultants top tips for managing your ag retail businesses in this inflationary environment.
Check your prices.
Customers expect price increases now, so seize the opportunity. Reset your prices to enhance your margins where possible. It’s important to raise prices upfront so you don’t have to make greater price jumps later.
On the same accord, consider how you are creating value with your offerings. Be sure to still offer deals and value to customers who may be experiencing inflation shocks themselves. This might mean getting creative!
Know your costs – and your numbers!
Strive to maintain adequate working capital. Look at the true inflation of your own costs. It’s likely not everything is increasing at the same rate. Your variable costs will typically rise faster than your fixed costs.
Engage your customers.
Aim to keep customers engaged and maintain relationships. Know who your primary and most profitable customers are. Think about where they may be sensitive to price increases. Your customers will be more understanding if you are increasing prices alongside and proportional to, other increases in the economy.
Leverage your tools.
Use the tools that you’ve invested in. Leverage your point-of-sale (POS) system to manage your inventory and customers. The management reporting features of POS systems can generate reams of data, but it’s only valuable if you can use it.
Managing inventory in a time of shortages can be challenging, so prioritize inventory accordingly. Determine “must-haves.” At the same time, don’t be afraid to sell out sometimes, especially with items that are perishable or seasonal.
Manage from a place of abundance rather than scarcity! Realize there are always challenges, but there is opportunity as well. Build on your business’s strengths, and remember to feel excitement, positivity and possibility, rather than dwelling on limitations, setbacks, and hardships.
Inflationary periods have historically not lasted long, and the fed is acting aggressively, so take the opportunity to adjust your pricing now. This can be a chance to push towards new clients and new business. Look at other businesses to see what they are doing — both your peers, and perhaps others outside your sector — and get creative!
Thank you to Farm Credit East business consultants: Keith Dickinson, based in Bridgeton, NJ; Erin Pirro, based in Enfield, CT; Jon Jaffe, based in Dayville, CT; and Gregg McConnell, based in Geneva, NY, for their contributions to this article. To read the full article, originally printed in Farm Credit East’s July Knowledge Exchange Partner, click here.