Inflation is an occurrence that most people are aware of but don’t truly understand. We just accept it is a burden that occurs that we have to deal with. However, inflation can also be a source of opportunity, and there is value in having a better understanding of it.
In my opinion, Inflation is already providing value even if we are unaware of it. The constant decrease in our purchasing power has to be one of the reasons people work hard. Without this seemingly perpetual force that is reducing our worth every day, there would be more of us just sitting at home or working less efficiently. Perhaps our favorite restaurants, gadgets or officemates may not be with us today if not for inflation.
While the hidden value of inflation can be argued, the value from taking time to understand it better and opportunities it provides is more definite.
We sell finishing materials in our family business. The most obvious occurrence of inflation for us is the price increase of goods from our suppliers. It was common practice for us to increase inventory prior to price increase so as to enjoy a higher gross margin when the new price takes effect. Of course, this is one of the most basic practices in business and all of our competitors who are liquid likely also do this. We recently decided not to increase our prices; instead, we aggressively searched for new customers to attract with our old prices. With this, we were able to gain new customers, and as long as we develop a good relationship with them, they’ll likely continue to transact with us even if our prices become the same as our competitors.
We never took time to consider the other impacts of inflation. Had we realized that it could push us to a higher tax bracket, we could have negotiated with suppliers to lower the increase in price in exchange for higher volume of order. Had we known that we could help control inflation, we could have done our part by working more efficiently.
It is natural to treat inflation as a problem and there is nothing wrong with that. However, it would be mistake to simply ignore it. Like many problems, it can be resolved, although only partially, but more importantly, it can be a source of opportunity.
In my opinion, Inflation is already providing value even if we are unaware of it. The constant decrease in our purchasing power has to be one of the reasons people work hard. Without this seemingly perpetual force that is reducing our worth every day, there would be more of us just sitting at home or working less efficiently. Perhaps our favorite restaurants, gadgets or officemates may not be with us today if not for inflation.
While the hidden value of inflation can be argued, the value from taking time to understand it better and opportunities it provides is more definite.
We sell finishing materials in our family business. The most obvious occurrence of inflation for us is the price increase of goods from our suppliers. It was common practice for us to increase inventory prior to price increase so as to enjoy a higher gross margin when the new price takes effect. Of course, this is one of the most basic practices in business and all of our competitors who are liquid likely also do this. We recently decided not to increase our prices; instead, we aggressively searched for new customers to attract with our old prices. With this, we were able to gain new customers, and as long as we develop a good relationship with them, they’ll likely continue to transact with us even if our prices become the same as our competitors.
We never took time to consider the other impacts of inflation. Had we realized that it could push us to a higher tax bracket, we could have negotiated with suppliers to lower the increase in price in exchange for higher volume of order. Had we known that we could help control inflation, we could have done our part by working more efficiently.
It is natural to treat inflation as a problem and there is nothing wrong with that. However, it would be mistake to simply ignore it. Like many problems, it can be resolved, although only partially, but more importantly, it can be a source of opportunity.
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