What to Do About Tariffs: Practical Advice for Small Businesses and Nonprofits
If you’ve been watching the news or talking with fellow business owners, you’ve likely noticed a lot of buzz about tariffs lately. You’re not alone in wondering “what to do about tariffs,” or “how will these tariffs impact my business?” Our clients are understandably concerned about rising costs, how customers might react to raising prices, and if we might see another recession in the U.S.
First things first: Take a deep breath. We’ve navigated through similar economic situations before, and while it’s natural to feel worried, there are proactive steps every small business and nonprofit can take to mitigate these challenges.
Understanding What to Do About Tariffs
Tariffs are taxes imposed by a government on imported goods, often to encourage domestic production and reduce reliance on foreign imports. While the intention behind tariffs might be positive (to strengthen local businesses and economies) they frequently lead to higher costs for businesses importing materials or products, and eventually, those increased costs can trickle down to consumers.
But here’s the good news: understanding what to do about tariffs can significantly reduce their impact on your business. Check out our advice for small businesses, B2B and B2C product or service-based businesses, and non-profits.
Practical Steps for Small Businesses
Audit Your Supply Chain
If you’re unsure what to do about tariffs, start by thoroughly reviewing your supply chain. Identify the materials or products that will be most affected. Can any of these be sourced domestically or from tariff-free lower-tariff regions? This initial audit helps clarify your position and identifies potential areas for strategic adjustments.
Negotiate with Suppliers
Engage your suppliers in transparent conversations – they won’t be surprised to hear from you. You may find opportunities to renegotiate terms or pricing structures. Suppliers facing the same tariff issues might be open to creative solutions like bulk buying, extended contracts, or shared logistics expenses to mitigate costs.
Explore Alternative Products
When price increases are inevitable, explore alternative products or materials that offer comparable value but are less impacted by tariffs. Offering your customers different options at various price points can keep them satisfied while maintaining your profit margins.
Increase Operational Efficiency
Focus on enhancing internal efficiencies. Simple steps like reducing waste, optimizing inventory management, and streamlining operational processes can cut unnecessary expenses and counteract tariff-related cost increases.
Keeping Customers Happy When Prices Increase
The question of what to do about tariffs isn’t just internal, it’s also about managing customer relationships effectively. Here’s how:
Be Transparent and Communicative
Honesty goes a long way. If prices must increase due to tariffs, communicate clearly and openly with your customers. Explain the situation, the reasons behind the price adjustments, and your ongoing commitment to providing value.
Offer Alternative Solutions
Provide customers with multiple product options. If prices must rise significantly on certain products, consider introducing alternatives that deliver a similar solution at a lower cost.
Enhance Customer Service
Focus on delivering exceptional service. When customers see added value in their experience with your business, they are more understanding about price adjustments. Offering loyalty incentives or rewards can also ease the transition.
Don’t Take Half-measures
Some companies are concerned about raising their prices and dip their toes in. They don’t make the full leap and start increasing prices incrementally. However, raising prices a little to soften the blow, only to then raise them again later will anger customers more than raising the price just once. Determine how much to raise prices and raise them.
Recession-Proofing Your Organization
Even as you tackle the immediate challenge of tariffs, it’s wise to think proactively about protecting your business in case of economic downturns. Here’s practical advice tailored specifically to different types of organizations:
Service-Based Businesses (B2B and B2C)
- Diversify Revenue Streams: Offer tiered or complementary services to attract varied customer segments. Identify additional upselling opportunities.
- Strengthen Relationships: Draw your customers and referral partners in, ensuring loyalty through uncertain times. Deepen your connections through personalized messaging, frequent communication. and proactive problem-solving.
- Invest in Marketing: Maintain visibility to stay top-of-mind, using cost-effective digital marketing strategies such as social media and email marketing. Don’t forget word-of-mouth and cooperative marketing.
Product-Based Businesses (B2B and B2C)
- Inventory Management: Keep inventories lean to reduce storage and overhead costs.
- Flexible Pricing Models: Consider restructuring your products and pricing – offer lower price alternatives or value-added packages to clients. Consider dynamic pricing strategies that can adapt to changing market conditions.
- Expand Distribution Channels: Broaden your market reach by diversifying sales platforms and considering online marketplaces or direct-to-consumer models.
Nonprofits
- Diversify Funding Sources: Don’t rely on a single or few sources of funding. Seek grants, individual donations, corporate sponsorships, and partnerships.
- Enhance Financial Management: Tighten up spending and financial oversight to maximize the impact of every dollar.
- Communicate Value: Clearly articulate your mission’s impact and results to donors and supporters to maintain and even grow financial support during tough times.
- Feel-good Messaging: messages about your impact in the community gives your donors something positive to think about – communicate frequently through email, social media, and phonebanking.
We’re Here to Support You
Navigating what to do about tariffs and protecting your organization from potential economic downturns can seem daunting, but you’re not alone in this journey. From the great recession to COVID, we have 20 years’ experience in helping small businesses and nonprofits pivot smartly, adapt to shifting circumstances, and build resilience.
We invite you to set up a free consultation to explore how we can support your organization. Whether it’s finding innovative solutions to rising costs, restructuring your services, or recession-proofing your operations, our expert team is here to offer personalized guidance.
Together, we’ll ensure you’re not just surviving economic shifts, you’ll be thriving through them. We’re in your corner, ready to tackle these challenges head-on and transform them into opportunities.
Don’t wait until tariffs start significantly impacting your business or a recession looms large. Contact us today and let’s build a robust, proactive plan to navigate the road ahead.