The Top 3 Mistakes Business Owners Make with Inflation

In a time of high inflation, there are three common mistakes that business owners make according to TGG Founder & CEO, Matt Garret. Are you making them in your business? Keep reading to find out!

Key Takeaways:

  • #1: Not acting fast enough
  • #2 Not doing enough to decrease the volatility of raw material costs
  • #3 Not Investing back into technology efficiencies

#1: Not acting fast enough

Chances are most small business owners have not increased their prices by 10%, but that’s what inflation has done in the current economy. Fortune 500 companies have all raised their prices over the past 12 months and yet, not all small business owners have so as a result they’re acting too slow.

The second part of this is not acting consistently enough. If you raised your prices two months ago and don’t think you need to raise them a second time, think again. You absolutely need to increase your prices because if you haven’t continually kept up with inflation, you’re losing money. To combat this, first think about raising your prices and then act fast!

Also, consider locking in prices with your vendors for long periods of time. The current inflation is not transitory so take advantage of this time to increase your prices and do everything you can to reduce your volatility of costs.

#2: Not doing enough to decrease the volatility of raw material costs

There are a lot of businesses having supply chain issues and their raw material costs are bouncing all over the place. If you’re using lumber, concrete or raw materials, and you find these skyrocketing raw material costs, what can you do?

On the financial side, it’s time to get some stability in the business. That means if prices continue to skyrocket, you win on a financial basis. You can then take advantage of that by keeping your prices constant.

Even though you can’t control the market, you can use financial instruments like hedges, futures, etc. to control your overall costs. You can’t control the immediate cost, but you can gain when it goes up. If you’re gaining when it goes up and it’s costing you money then you’re staying relatively even. Think about how to take advantage of those financial instruments in times of hyper-inflation or hyper volatility.

#3: Not Investing back into technology efficiencies

In a time of high inflation, it’s mandatory that you invest back in technology efficiencies. You’re going to find that it’s going to get to a point where it’s so expensive to do business the old way, that it breaks and you have to do a new way.

It’s crucial to find innovation, efficiencies, and more effective ways to do business. This is a great time to be thinking about investing in technology by upgrading systems and processes because the way you’ve done things the last 20 years or so, just might not work anymore. In a time of high inflation is when you need to invest in efficiency and productivity gains inside of your business.


To recap, act fact, check all of the financial instruments you might be able to use to hedge your bets and keep your costs and prices relatively constant and look to innovation.  During a recession or time of high inflation, most people think about the short term, and not the long term and now is the time to maintain, if not increase, your profitability.

This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.

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