No Guessing Games

Forecasting can often be a guessing game and you have heard enough bad jokes about meteorologists to understand this is true. This is not only true with regards to weather, though, and this showed itself last week when reports about inflation for the month of August showed higher numbers than expected.

Since making predictions is so difficult, you will not find me doing it here. The current situation with inflation has many causes, many effects, and navigating it has been difficult enough for so many people that platitudes may even be harmful.  I do think there is a lesson in there, though, for business owners and this is to realize the power available in being on top of your bookkeeping.

The inflation effects have been felt by all of us just when we check out at a store, make a purchase online, and at the gas pump. And when you can feel it in individual transactions, then those all add up. To take it beyond a feeling, though, you need to know actual numbers.

I think it is safe to say that there is not a business that has not felt the state of inflation in some way. Even if one just works alone at home and doesn’t provide any actual physical goods, just the cost of heating/cooling that home or driving your car to an appointment has increased.

And this is a time when those numbers could be very important. You want to make sure that your business can absorb the increased amount of expenses.  And for some, you may be able to do that without worrying about your income level.  For many, though, you may need to increase your own prices, as well, to keep your level of profit in a comfortable area.

Without real expense numbers, though, how would you know where you had to price yourself?

You cannot wait until your bank balance gets to a worryingly low point to realize how much things got ahead of you. By that point, it may be too late to take meaningful action.

Of course, it’s also possible that as those balances dwindle, as expense increases are viscerally felt, one can just be reactive to try to counteract them. But you want to be meaningfully reactive, you want to know just how things have changed so that your actions come with confidence, so you aren’t just making guesses – you know, like some weatherman.

Warmly,

Josh Bousquet
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