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unexpected consequences affecting small business

An example of unexpected consequences affecting small business could be a small bakery, for instance, that regularly purchases products like pie tins and whipped cream. While a bakery is far from other businesses in the steel or aluminum industry, products like these are essential to their operations. Odds are that companies that make pie tins or whipped cream (which comes in metal canisters) will adjust their prices to reflect the new costs or lay off their employees.

The small bakery that was already operating on razor-thin margins ends up absorbing a good portion of these new costs from their suppliers and will likely have to renegotiate standing arrangements. If you are in that bakery’s position, you can’t afford to eat those new expenses. So, what can you do?

According to Richardson, there are a few things small businesses should keep in mind as the supply chain adjusts to these new tariffs:

Stay attuned to profit margin. What costs can you absorb and which must be covered? Are you able to reduce any expenses to offset the increase in goods subject to tariff-related hikes? Can you renegotiate a favorable deal despite those price increases? Where can you offset costs before raising your prices?

Understand your own pricing. Raising prices is a dangerous game for small businesses. Sometimes a price hike might be necessary to stay profitable when suppliers increase the cost of doing business, but it could keep customers away, damaging revenue. Understanding how you’re priced in terms of the market average, as well as how highly your customers value your product and what kind of price increases they would tolerate, is key to making smart pricing decisions.

Manage inventory levels. It is always important to manage inventory efficiently but especially so when costs are rising and uncertainty is high. If your warehouse is full to bursting with goods that simply aren’t moving, you have money tied up that could keep your business afloat during stormy weather without passing costs on to customers (or at least minimizing how much of those costs you pass on to your customers.) Cash is your business’s lifeblood; make sure you only buy and replenish the inventory that moves.