3 CRITICAL WAYS FOR STARTUPS TO OFFSET INFLATION
The ramifications for new Founders in 2022 will be more than, Ominous. It’s now been 10 years since inflation reared its ugly head. The world’s top economists, in volumes, starting in mid-2021 claimed it could last for years. At the epicenter, the U.S. Federal Reserve inferred that the current state of inflation could not be “transitory” as once surmised. So how do startups, especially newly funded, with non-inflation experience protect their businesses? Here are the 3 critical ways for startups to offset inflation
There are not many options here. But there are three that standout out as “tried & true” choices.
Let’s discuss.
Traditionally, Founders did 3 short-sighted things: raised prices, cut margins, or cut corners across the board. Those made investors, customers, and the board miserable. Then what remains today? It is somewhat optimistic based upon the plethora of data, tools, and agility options available.
- REVAMP THE SOLUTION
Startups can “bundle or unbundle” their present solutions and create “improved value propositions.” They can inch in price increases with fewer select features. Or reduce price gaps to move customers into higher-margin configurations or services. - REPOSITION YOUR BRAND
Across time, most Tech offerings are either overpriced or underpriced — and can often be by a wide margin. Depending on the business value that’s delivered, startups can adjust or right-size pricing and re-align their product positioning. - SUPERSEDE YOUR PRING MODEL
When you replace your prices instead of raising them, you can move the customers’ eye level to a lower price point. New pricing models with creative discounts and bundles will recover your margins over time with higher LTV.
Investors tend to find these revenues streams more attractive because they are predictable and because they spread risk over a wider basis of customers. With present data resources and analytical power, there’s no reason why startups cannot open up discussions on more strategic responses to inflation. Instead of choosing among tactical price increases, margin hits, or reductions in quality.
If companies don’t want to make a wholesale change to a new model, they can allow the new and old models to exist together and allow customers to self-select. Excerpts came from a Pricing Strategy, HBR.ORG, Jan. 18, 2022.
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