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[Image]Gas Prices Going Through the Roof!  Interest Rates are Climbing!  Inflation on the Horizon!  Social Security Going Bankrupt!  Health Care Unaffordable! Chicken Little Says, “The Sky is Falling!”
It’s bad enough that you are constantly worrying about the revenue side of your income statement when the expense side is just exploding.  The pressure from competition to keep your prices low and higher expenses squeezes your profit.  As a small business owner, you are left with trying to make hard decisions that affect your customers, employees and suppliers.  It’s times like these where it’s a good time to look at the overall strategy of your business.  So where do you start?
Taking a business plan approach to your business is a great place to start!  Look at your marketing plan to see if your strategies are still relevant.  Are your customer acquisition methods still working?  Is customer service still the best it can be?  Look at your financial plan.  Are your margins holding or are they under pressure from suppliers and vendors?  Do you have sufficient cash to meet your obligations?
Revenues are generated by demand for your product or service.  There are many questions to ask about what is changing about your customers during uncertain times.  We haven’t experienced inflationary times in a generation.  Price sensitivity is a key concept that will be talked about as if it is a new idea. 
As your costs increase, many businesses need to determine if some or all of those costs can be passed on to their customers.  You, as a small business owner, need to make the determination if you will lose any customers if you institute a price increase.  If you will lose a significant number of customers with small price increases, this means your customers are very price sensitive.  Also, if your product or service is not a commodity, odds are your customers will be less price sensitive.  Conversely, if your product or service is a commodity, the more likely that customers will shop around to find a better price, hence a higher price sensitivity.
What if your customers are very price sensitive and you cannot raise your prices because losing any customers would be a disaster?  Your only choice is to take a hard look at your expenses.  The trick to making these hard decisions is to minimize the affect on your business’s ability to service your customers while maintaining good relationships with suppliers and employees.  Unfortunately, the reality is that someone will not be happy.
With fuel costs skyrocketing, you may be able to get away with a fuel surcharge.  There are many businesses that are freight-oriented and are having to consider this change.  If you are considering a fuel surcharge, consider that it be used only temporarily.  When gas prices settle down (and they will), your customers will perceive that you should incorporate the added expense into your pricing.
Annual increases in health care costs have been outpacing increases in all other business expenses for quite a while.  Even large companies that spend billions on health care for their employees, are considering drastic measures to reign in the cost of this benefit.  You may have to consider health plans that are not as rich in coverage or require that your employees share in the premium cost.  If health care has been a bigger part of the overall compensation package, the harder it will be to make these changes and not affect the motivation of your employees.  One option that is becoming popular among small businesses is to offer a fixed dollar benefit for health care premiums and let your employees find an insurance plan that fits them best.  The general trend is that the more that employees have to pay for their own medical care, the more they will be discriminating with their medical expenditures and look to prevention options, such as a better diet and exercise.
With all the feathers being ruffled over changes to Social Security and the harbingers of doom being broadcast by both sides of the political fence, it is still extremely important to keep making contributions to your retirement plan.  As a business owner, if you feel that you have to cut back retirement benefits, one way would be to cut your match of the employee’s contribution in a defined benefit plan.  If you are considering eliminating a retirement benefit or plan, always consult your CPA and your financial advisor to discuss the ramifications, both with the IRS and with your employees.
If you got this far, it's hard to believe that I wrote most of this article for The Business Times in Grand Junction six years ago!  Yes, 6 years ago!!!  While things change, some things stay the same.  What's that tell you?  Keep at it!  Focus.  Know that you have control over some things, yet it doesn't pay to spend your energy worrying about others.