Snohomish
County business owners are feeling the effects of price increases. They are
adjusting and planning for increased inflationary costs that are an inevitable part
of the economic landscape for 2022.
According to the U.S.
Bureau of Labor Statistics, in December 2021, Seattle and Snohomish
County area prices were up 0.6 percent in November, and in December were up 7.6
percent over 2020. In 2021, food
prices increased 8.4 percent, and energy prices jumped 25.0 percent.
As a
local business bank, Coastal Community Bank bankers meet regularly with local
businesses to help them prepare and plan for market and economic changes like
inflation and supply chain issues.
“We ask thoughtful questions during
economic adjustment periods to help customers plan accordingly,” says Russ Keithley,
Chief Banking Officer at Coastal Community Bank. Keithley and the Coastal team
regularly provide the following tips to businesses seeking advice.
Plan for Increasing Cost of Goods (COGS)
The cost of goods increases during inflation, including raw
materials and inventory costs. Suppose COGS is increasing or expected to
increase. In that case, Keithley recommends working with your banker to
evaluate if buying additional inventory is a good option based on the business’s goals
and inventory flow and explore financing options to help make those purchases.
Keithley explains that purchasing stock or inventory while rates or costs are
lower could save the business money in the long run.
Control Operating Costs
“Will your lease payment,
interest payment, or staff costs go up? These are common questions we ask,”
says Keithley.
To help control lease costs, bankers
recommend businesses consider buying real estate or lock-in longer-term leases
to take advantage of lower rates.
“If interest payments are going
up, consider refinancing or locking into a longer-term loan at lower rates,”
says Keithley.
To help control employee costs,
Keithley recommends investing in employee retention measures. “Take care of
your talent. It is more cost-effective to retain good employees than to lose
and hire new employees.”
Additionally,
businesses can consider investing in technology to streamline processes.
Bankers can help companies to explore if equipment purchases are right for
their business and available financing options.
Save for a Rainy Day
At the same time, as you are
investing in the company, be sure to save money for future needs, Keithley
says.
“The healthiest businesses we
work with are prepared for changes in the economy like inflation. These
companies invest in the business and are also considerate of their own access
to liquidity and savings,” says Keithley. To help put money away, Keithly
recommends making saving a habit and putting money in Money Market or high-interest
savings accounts that earn interest.
Know Your Market
When working with businesses,
Keithley says he often asks what their competitors are doing, especially when
they increase prices.
“Make sure you are competitive
by basing decisions on cost increases and what the market will bear. Also,
understand how your business is differentiated from competitors. During
economic changes, knowing your strengths within the market can help you stand out,”
says Keithley.
Communicate with Your Business
Team
“We highly recommend you talk to
your team frequently, which includes your banker, suppliers, vendors, industry
group associations, employees, and customers, to learn what is on their mind
and part of their plans,” says Keithley. “This will help you prepare for things
they are anticipating.”
“Fostering strong connections
and building relationships is important for long-term business success,” says
Keithley.
Russ Keithley is Chief Banking
Officer at Coastal Community Bank. For more information, please contact a
lender at one of Coastal’s 14 local branches. www.coastalbank.com Member
FDIC. Equal Housing Lender.
