The Money Blog

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Navigate Inflation & Protect Your Practice

conversations profitwithoutpills Jun 02, 2023



I had a thought-provoking conversation with finance director Richard Stone on the intricacies of profitability, inflation, and the power of data in making informed decisions. Our discussion unveiled some valuable insights that can empower businesses to thrive even in challenging times.

Inflation is literally the inflation of the money supply > reduction in purchasing power of currency, therefore higher prices.

When there is an excessive increase in the money supply, such as through the printing of money, it  leads to inflationary pressures.

The current inflationary pressures are characterised by a significant contribution from supply-side factors. For example, rising energy prices, increased food prices, and higher costs of building materials are driven by the actions of certain market participants. These factors can result in higher prices for consumers.

The concern arises when central banks respond to inflation further by raising interest rates, as this can increase strain individuals and businesses who are already facing the burden of rising prices.

Part 1: Profitability, Efficiency, and Cutting the Fat

One of the key takeaways from our conversation was the importance of understanding profitability at a granular level. Businesses often focus on top-line revenue, but the real power lies in drilling down into the numbers to identify where the money is being made – and where it's being lost. Richard emphasised the significance of being aware of the cost of serving different customer segments. By analysing the data, businesses can identify low-value services that drain resources and optimise their offerings for maximum profitability.

Part 2: Navigating an Inflationary Environment

As inflation rates rise, businesses face the challenge of maintaining profitability while managing increasing costs. Richard drew attention to the fact that the knee-jerk reaction of raising prices might not always be the best solution. Instead, he proposed a more strategic approach – evaluating where costs can be reduced, efficiency improved, and where price adjustments are genuinely necessary. He encouraged businesses to become smarter about their pricing strategies and offered insights into responding creatively to inflationary pressures.

Part 3: Empowering Business Owners with Data

The conversation then delved into the role of data in driving business decisions. Richard emphasised that while accountants are essential for compliance and retrospective analysis, they might not be equipped to provide the real-time insights businesses need. He encouraged business owners to take the reins and become more proficient in analysing their data. With tools like Excel business owners can empower themselves to understand customer profitability, monitor trends, and identify opportunities for growth.

Part 4: Overcoming the Fear of Numbers

One of the prevalent obstacles business owners face is the fear of numbers. Richard likened this fear to a barrier that can be overcome with curiosity and a willingness to learn. Just as athletes monitor their performance metrics to improve, businesses can adopt a similar mindset to track and enhance their financial performance. Breaking down the complex numbers into manageable pieces and seeking guidance from online resources can help demystify the process.

Part 5: Turning Challenges into Opportunities

The conversation concluded with a call to view challenges as opportunities for growth. In an inflationary environment, businesses can differentiate themselves through quality, efficiency, and creative strategies. By focusing on where they truly excel, understanding customer needs, and leveraging data to inform decisions, businesses can not only weather the storm but also come out stronger.

In Conclusion: Taking Charge of Your Business's Financial Future

Our discussion with Richard shed light on the power of knowledge, adaptability, and data-driven decision-making. In an era where business dynamics can change rapidly, equipping yourself with the tools to navigate challenges and seize opportunities becomes more crucial than ever. By embracing a mindset of curiosity, breaking down the fear of numbers, and diving into the depths of your business's financials, you can not only survive but thrive in the face of uncertainty.

Remember, your business's success is within your grasp – all it takes is a willingness to explore, learn, and take calculated steps toward a more profitable future.  

The Health-prenuers Guide

Coming Soon!

I'm on an exciting journey with my book, taking it back to the good old days when books were served up in newspapers, piece by piece. I'm crafting circa 500 words a day and sharing it with all of you.

Now, this book is for you if you've ever had a brilliant idea or a vision for your own healthcare business or perhaps you want to revitalise your existing service, but you're stuck, not sure how to confirm if there's a market for your idea or how to bring your vision to life.

Let's embark on this journey together