Snohomish County business owners are feeling the effects of price increases. They are adjusting and planning for increased inflationary costs that are an inevitable part of the economic landscape for 2022.
According to the U.S. Bureau of Labor Statistics, in December 2021, Seattle and Snohomish County area prices were up 0.6 percent in November, and in December were up 7.6 percent over 2020. In 2021, food prices increased 8.4 percent, and energy prices jumped 25.0 percent.
As a local business bank, Coastal Community Bank bankers meet regularly with local businesses to help them prepare and plan for market and economic changes like inflation and supply chain issues.
“We ask thoughtful questions during economic adjustment periods to help customers plan accordingly,” says Russ Keithley, Chief Banking Officer at Coastal Community Bank. Keithley and the Coastal team regularly provide the following tips to businesses seeking advice.
Plan for Increasing Cost of Goods (COGS)
The cost of goods increases during inflation, including raw materials and inventory costs. Suppose COGS is increasing or expected to increase. In that case, Keithley recommends working with your banker to evaluate if buying additional inventory is a good option based on the business’s goals and inventory flow and explore financing options to help make those purchases. Keithley explains that purchasing stock or inventory while rates or costs are lower could save the business money in the long run.
Control Operating Costs
“Will your lease payment, interest payment, or staff costs go up? These are common questions we ask,” says Keithley.
To help control lease costs, bankers recommend businesses consider buying real estate or lock-in longer-term leases to take advantage of lower rates.
“If interest payments are going up, consider refinancing or locking into a longer-term loan at lower rates,” says Keithley.
To help control employee costs, Keithley recommends investing in employee retention measures. “Take care of your talent. It is more cost-effective to retain good employees than to lose and hire new employees.”
Additionally, businesses can consider investing in technology to streamline processes. Bankers can help companies to explore if equipment purchases are right for their business and available financing options.
Save for a Rainy Day
At the same time, as you are investing in the company, be sure to save money for future needs, Keithley says.
“The healthiest businesses we work with are prepared for changes in the economy like inflation. These companies invest in the business and are also considerate of their own access to liquidity and savings,” says Keithley. To help put money away, Keithly recommends making saving a habit and putting money in Money Market or high-interest savings accounts that earn interest.
Know Your Market
When working with businesses, Keithley says he often asks what their competitors are doing, especially when they increase prices.
“Make sure you are competitive by basing decisions on cost increases and what the market will bear. Also, understand how your business is differentiated from competitors. During economic changes, knowing your strengths within the market can help you stand out,” says Keithley.
Communicate with Your Business Team
“We highly recommend you talk to your team frequently, which includes your banker, suppliers, vendors, industry group associations, employees, and customers, to learn what is on their mind and part of their plans,” says Keithley. “This will help you prepare for things they are anticipating.”
“Fostering strong connections and building relationships is important for long-term business success,” says Keithley.
Russ Keithley is Chief Banking Officer at Coastal Community Bank.
For more information, please contact a lender at one of Coastal’s 14 local branches.
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