Inflation: What’s Eating Your Wallet?
I’m still laughing over a tweet I saw the last time we had major hikes in gas prices. It was someone (hopefully a lot younger) who commented, “I don’t understand why everyone’s freaking out about gas prices rising. It doesn’t matter. I just put $20 in my tank every time.”
One of those trainwreck-tweets, you know? You don’t want to look, but you can’t look away.
Unlike that poor, unfortunate soul, you’ve no doubt seen what inflation is doing in your personal and professional lives. We’ve all caught ourselves staring, open-mouthed, at the price of some of our everyday purchases. We’ve watched subscriptions go up in price. We’ve seen margins cut.
Hopefully you’re not yet in the phase of making decisions that are too difficult. But unfortunately, that time could be coming soon. And it’s important to know why, how, and what to do about it—for the sake of yourself and your agency.
I’ve been working with my fellow agency owners over the past 5 years to get a grip on their finances and to make sense of what their financial statements (and accountants) are telling them. I’m here to tell you that you can too—and when you do, it will help you make informed, proactive decisions instead of just shooting in the dark.
And with the way commentaries are going right now across the agency atmosphere, I feel like my very own Bat Signal has been shot into the sky.
So let’s get to talking—and get to resolving—your questions about inflation, how it affects you, and what steps you should be taking right now to protect yourself and your profits.
What is inflation, and what causes it?
Inflation is, in its simplest terms, the increase in prices of goods over time. It’s the reason why your parents and grandparents always talk about going to movies for a nickel and getting popcorn for and a drink for another, and you’re spending the money for half a tank of gas on date night.
Inflation has a number of causes that can stem from any number of factors. As agency owners, it’s not as important for us to know why inflation is happening, as it is for us to know how to react when it does.
How long will it last?
Here’s another part of information that’s not important, and here’s why:
You’re changing your agency’s spending, saving and price margins for long-term success—not putting your agency on a crash diet and hoping that you save a lot of money in the process.
We don’t necessarily know when inflation will end. It doesn’t have an end date. In fact, what usually happens is that markets and salaries adjust around those prices, so that those prices suddenly start making more sense.
You won’t have a magical drop in prices that will send you back in time to the ten-cent movies. You won’t have a moment where you’ll feel comfortable accepting your old prices again, and neither will anyone else.
That’s why we make plans for our agencies in the face of inflation, not in spite of it.
How will this affect my agency?
In the short term, it’s probably meant that what you’re earning doesn’t seem to stretch as far as it used to. That’s to be expected.
Now it just comes down to what you choose to do about it.
Does this spell trouble for my agency’s future?
Here is where I’ve got to be brutally honest: There are going to be some agencies, and some projects, that don’t survive the effects of inflation.
That’s the bad news.
But here’s why you shouldn’t be worried:
Agencies that take the biggest, sometimes-fatal hits are going to be the ones who continue operating like ostriches with their heads in the sand.
You’re here. You know what’s up, and you’re ready to fight for what you’ve built. So, that’s not you.
I hope that this helped clear up the basics for you and did more good than harm for your anxiety.
The most important thing of all to remember is that, even though inflation doesn’t last forever, you and your agency need to be acting accordingly while it does.
That means making changes to your policies, procedures, and pricing to ensure that you’re protecting yourself from any big financial downfalls.
We’ll be talking about ways to safeguard your agency against inflation over the next few weeks, both here and on the podcast. The best part about these techniques is that they’re still going to help your agency thrive, long after inflation gets under control.
I hope you’ll stick around and discuss your inflation fears and triumphs with me!