There's no question the general increase in the price of goods and services is top of mind for small business owners. Recent research shows inflation affecting small businesses is the No. 1 concern among entrepreneurs, far ahead of labor issues and supply chain disruptions.
How is inflation affecting small business spending?
According to Bank of America's 2023 Small Business Owner Report, inflation has driven a range of operational changes to small businesses around the country:1
- 60% are raising prices
- 42% are reevaluating cash flow and spending
- 31% are reducing business costs
Thankfully, technology can help those wondering how to combat inflation and rising costs. One recent report found that 66% of businesses are increasing IT investment due to the risk of inflation. That number is even higher among firms forecasting higher profits.
Technology and inflation: The opportunity for small businesses
When used strategically, technology can address small business inflation in positive ways. It can boost productivity, foster greater collaboration and improve efficiencies. This includes:
1. Digitizing and automating manual, repetitive tasks
Bank of America's 2023 Small Business Owner Report shows how much digital transformation is already underway among growing companies, as 80% of business owners digitally optimized their business over the last 12 months, a significant increase from the previous year. Rather than dealing with paper invoices and receipts, for instance, 31% of those business owners have implemented an online sales process, and 60% have begun accepting cashless payments.2 Nearly half (48%) of business owners overall said they now prioritize a digital-first approach for marketing as well.3
Automating processes with digital tools helps operations run more efficiently, according to 90% of the small business owners surveyed, making it easier for them to manage cash flow (53%) and save time (65%). There were also 44% who said these technologies help them reach new customers.4 These benefits could become even more valuable as small business inflation continues to impact businesses. Fast, reliable business internet with powerful upload speeds can help small businesses make the most of digital transformation and automation.
2. Enhancing operations and customer experiences with analytics and AI
Inflation affecting small businesses can raise a lot of difficult questions. What will customer demand look like? How much budget should be allocated for raw materials? What can be done to reduce customer churn and increase share of wallet?
The answers to these questions are often within data that small businesses collect on a regular basis, such as purchase histories and expense records. Artificial intelligence (AI) such as machine learning and analytics software can sift through vast quantities of this data to identify trends and patterns and predict the outcome of small businesses' actions.
The 2023 American Express Small Business Financial Confidence Report found 41% of firms are already using AI to guide their decision-making, and 39% said the technology helps them save time. This was closely followed by 20% who are using AI to offer more efficient customer service.
Small businesses could use AI to help create more accurate sales forecasts, for instance, while also deepening customer relationships and building the human connection by offering more relevant recommendations of new products and services online. Contact centers could use it to provide faster troubleshooting through the channels customers prefer.
Analytics and AI can also help make your operations more efficient. For example, GPS software can help small businesses streamline their fleet management with easy-to-use tools that can analyze performance to help cut costs, increase productivity, simplify maintenance and promote safety.
3. Incentivize your workforce, wherever they are
Cutting back on employee benefits may feel like a possible response to small business inflation, but the Bank of America survey shows a majority are offering additional benefits and perks to attract new talent (51%) and retain employees (53%).5
One way to do this is to offer greater flexibility on where their jobs get done. In fact, data from Payscale found 31% of businesses are adopting hybrid work models, perhaps because 51% said they were experiencing resistance around returning to offices.
Allowing some degree of remote work could widen the scope of talent available to hire, with reduced salary expectations. Recruiting firm Robert Half found roughly one in three U.S. workers would be willing to earn less for the opportunity to work remotely. The average reduction they would be willing to accept was 18%.
A mobile-first, cloud-based phone system supports a decentralized workforce by ensuring everyone stays connected, even when some employees are on the go between the office, home or another location. Technology can help foster virtual collaboration to ensure efficient and effective remote work.
4. Optimize your spending to maximize return on investment (ROI)
With inflation affecting small business owners everywhere, this is a great time to step back and evaluate your current technology spending and how working with the right provider could make a difference in what you can achieve.
Rather than paying separately for internet, voice and security tools, for instance, ask about bundles that include fast and reliable internet connectivity, with easy access to 24/7 technical support, to support the applications you need to efficiently run your small business.
Owners may hesitate to change their technology investments because they already have devices like phones deployed. A good provider will recognize this and make it easy to find out if you can bring existing phones over while shopping for new plans.
When looking to implement more technical solutions, small businesses should consider whether hiring internally is the best approach. Competition for IT staff is fierce—nearly three-quarters (74%) of U.S. firms reported difficulty finding suitable IT personnel. With a managed services partner, though, small businesses can get the expertise they need without adding additional headcount. It also frees up existing staff to work on more mission-critical tasks.
1 Bank of America, 2023 Small Business Owner Report, page 6.
2 Ibid, page 11.
3 Ibid, page 12.
5 Ibid, page 7.