By Nick Mann

Inflation reached a 40-year high in late 2022. According to research from the Bureau of Labor Statistics, the all-items index increased by 8.6% year-over-year, which has created economic hardship for many businesses. While the current economic climate is far from ideal, there are several ways for military surplus/outdoor/tactical brands to offset inflation costs and be more profitable. Here are some specific strategies. 

 

Monitor your profit margin

 

A good starting point is to gain full visibility on your current profit margin so you can see where you are and how much improvement you need to make (if any). The simple formula for calculating profit margin, Investopedia writes, is to “subtract the cost of goods sold (COGS) from your total revenue and divide that figure by the total revenue. Then, multiply that figure by 100 to get a percentage.” In terms of what’s considered a good profit margin, it can vary slightly from business to business, but generally, a margin of 7% to 10% is regarded as healthy. A profit margin of 5% or less is considered poor. And anything above 20% is considered high. Once you have that number calculated, keep a close eye on it to see if it increases or decreases over time to maintain a bird’s-eye view of the trajectory of your business. 

 

Automate operations wherever you can

 

Automation has grown by leaps and bounds in recent years, and there are more ways than ever for businesses to automate tasks that previously had to be done manually. One example is using a point-of-sale software system to automatically update inventory counts as products are sold and notify you when inventory levels are running low. Many platforms even have a feature that will automatically order new inventory for you so you don’t have to worry about it. Not only can this save a ton of time, it ensures a higher level of accuracy. Some other examples of areas of operations that can be automated include document processing that takes care of invoices and purchase orders for you, payroll where you can automatically schedule employees to be paid and website contact form responses that send pre-written responses to basic questions. This is a great way to combat the growing cost of labor, which can, in turn, offset inflation costs. 

 

Follow the 80/20 rule

 

The 80/20 rule, also known as the Pareto Principle, states that “80% of outcomes result from 20% of all causes for any given event,” Investopedia explains. It applies to countless areas of business, but one of the biggest involves choosing which products to sell. Under the 80/20 rule, roughly 80% of your products will account for 20% of sales, while the remaining 20% of products will account for 80% of sales. By identifying the 20% of products that generate 80% of sales, you can focus your efforts on the right products that your customers are most receptive to. Conversely, by identifying the 80% of products that only generate 20% of sales, you’ll know what to scale back on or eliminate altogether. While your business may not have quite this heavy of a skew, you’re guaranteed to have some products that sell better than others. By figuring out what to concentrate on, you can optimize your inventory, generate more sales, and generally make your operations more efficient, which should all culminate in offsetting inflation costs. 

 

Use apps to track productivity and efficiency

 

The more efficiently you and your employees complete tasks, the more profitable your business should be. Increasing productivity and efficiency involves a two-pronged approach. First, you’ll want to use apps to track productivity and efficiency so you can get a baseline reading of where you currently are and have quantifiable data to reference. And there are countless apps you can use for this. One of the most straightforward is called Toggl, which allows you to track how long it takes to complete any task by simply starting the clock at the beginning and stopping the clock once it’s done. Toggl will then generate detailed reports that you can reference later on to see how efficient you are in a particular area and where specific improvements could be made. Another good app is called TrackingTime, which lets you monitor your team’s workload in real time and measure their productivity by recording the time spent on each project. Because it integrates with other popular productivity platforms like Trello and Asana, it’s extremely helpful for gaining a comprehensive perspective of your productivity and efficiency. 

 

After you generate data over the course of at least a few weeks, you should be able to spot trends so you’ll know what to work on improving. Say, for example, you find that you’re spending an exorbitant amount of time on financial-related tasks like invoicing and payroll. That would be a key area you’d want to address. In that case, you may want to implement automation tools, as mentioned earlier, to reduce the amount of time you spend on financials. Over time, small adjustments here and there can add up to have a big impact and make your business significantly more profitable. 

 

Maintaining healthy margins even amidst record inflation

 

Inflation is inevitable in the business world. But with an 8.6% increase from 2021 to 2022, it’s left many businesses scrambling to offset those costs. While there’s no magic bullet, there are several ways to keep inflation under control and maintain healthy profit margins regardless of what happens. On top of that, the strategies listed above can help you run your business more efficiently in general and capitalize on helpful tools like automation software and productivity apps.

 

Nick Mann writes professionally for both digital and print publications in business, marketing and technology. He’s also an avid traveler and sports fan.