How can businesses, especially smaller ones, handle the effects of tariff increases?
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Tariffs – also known as import duties – are taxes levied when products are shipped from one country into another. Tariff increases on Chinese goods have been in the news lately; U.S. companies using imported materials are impacted via their supply chains. How can businesses, especially smaller ones, handle the effects?
Search for new suppliers. Vetting alternate suppliers is something your business should do regularly anyway, says Vanessa Merit Nornberg, president of New York City body jewelry supply company Metal Mafia. Looking for new ways to do things well ensures quality. “Looking outside of your usual production areas may be the way to go,” she tells Inc.com, with exploration of alternate suppliers a way to safeguard your supply chain.
Know your pricing, Lyneir Richardson of Rutgers Business School tells BusinessNewsDaily.com. Business owners should be aware what costs cannot be absorbed and if any expenses can be reduced to offset tariff hikes. “Raising prices is a dangerous game … 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,” he notes. Richardson advises business owners research how their prices compare with the market average.
Communicate with customers on tariffs every step of the way, says Ari Zoldan of New York’s Quantum Media Group. He says you cannot overcommunicate on this issue. “If … you are unable to absorb or offset the rising costs of tariffs, you'll need to pass on the excess to your customers in the form of price increases,” Zoldan tells Inc.com. “Understanding what they are willing to accept and making clear to them your rationale for doing so are important aspects of retaining their business.” He warns revenue will sink if you hike prices too high and lose customers, making higher operating expenses much more difficult to handle.
