Inflation-proofing your small business

When small business owners hear the word “inflation,” they can understandably worry about cash flow, shrinking profit margins and price increases. 

A record-setting 58% of small business owners cited inflation as a top challenge in the first quarter of 2025, reflecting the ongoing impact rising costs have on business operations.

However, with a willingness to adapt and some hard work, there are strategies small businesses can implement to mitigate the effects of inflation.  

What is inflation?   

In simple terms, inflation means the prices for goods and services go up in general while the purchasing power of money decreases. In other words, your money just doesn’t go as far as it used to. At the same time, long-term inflation can lead to higher interest rates, higher wages and economic uncertainty.  

How does inflation affect small businesses?   

Small businesses are particularly sensitive to inflation. With typically smaller operating margins, they tend to feel the impact of rising costs – for example of raw materials, energy or wages – more intensely. Higher interest rates that come with inflation can also make it more difficult for small businesses to secure loans.  

At the same time, decreased purchasing power lessens the leverage merchants have when negotiating with suppliers.  

How does inflation affect customers?   

Just like small businesses, consumers feel rising prices. As a result, they may change their shopping behaviors, seeking out discounts, trying ‘value’ brands and prioritizing necessities. When they do treat themselves, they may seek excellent customer experiences.    

Keeping your business strong during inflationary times   

When inflationary pressures hit, the kneejerk reaction may be to cut overhead or other expenses, but there are opportunities to beat back inflation with revenue growth by implementing the following strategies. 

1. Prioritize customer service

Focus on building relationships, which can cost little to implement while having big impact. Though customers’ discretionary income may be limited, they may be willing to spend money if they can expect a higher level of service in exchange for their visit.  You can make your business stand out by focusing on:   

• Staff training on how to deliver exceptional customer experiences  
• Loyalty programs, customer appreciation events and gift cards that can help create loyal customers and encourage repeat visits   
• Technology solutions that power faster payments and allow for customer choice, making payments swift, flexible and easy    

2. Use data for better decision-making

Understand your financial performance fully, identifying the costs and profits behind every product or service.   

• If certain products are less profitable, find ways to lower manufacturing costs or eliminate that product altogether, while refocusing the business on more profitable areas 
• Drive growth by bundling products or scheduling sales that shift more lower-cost, or high-margin units  
• If you don’t have access to comprehensive business data, consider technology like Commerce360, which features real-time business analytics and insights to help you identify what’s working – and what’s not    

3. Bring the two together

When you know your customers well, you can serve them better – and when you know your business inside out, you can respond faster and smarter to macroeconomic pressures.  

• Provide customer experiences and offers that feel targeted to individuals using rich consumer insights   
• Understand the products, offers and messages that segments of customers respond best to  
• Adjust your pricing strategy – from where to raise prices to surcharging – based on what’s impacting profit margins most, or where data predicts the best outcomes 

Many merchants find success by innovating during high inflation periods, for example by creating new products that meet consumers’ evolving needs. Others create low-cost add-ons or upgrades that are an easy “yes” for customers and keep them coming back.   Using data and listening to customers can help you discover the best way forward during times of inflation and beyond.

Worldpay can help.

Commerce360 is an all-in-one business management and payment solution designed to unlock opportunities, elevate customer experiences and empower your business to thrive today and scale for the future.

With built-in tools for real-time analytics and insights, faster payments and flexible methods, customer loyalty and retention programs, and more, Commerce360 can help businesses overcome inflationary challenges and thrive.

For more information, contact your Worldpay representative today, or reach out through the contact form.