The latest regional data from the Bureau of Labour Statistics shows that inflation in the Atlanta area is higher than the average across the United States. For context, in June, the Consumer Price Index (CPI) for Atlanta rose 4.6% year-over-year, compared to the national result of 3% for the same period.

The good news is that the Atlanta result is an improvement on the most recent high of 11.7% year-over-year in August 2022, but prices are still rising faster in this area than the average for the entire United States. 

As many of us know, inflation is damaging for small businesses on two fronts: it both delivers rising costs and squeezes your customers’ spending power. For example, if you’re a small cafe in Atlanta and are buying the items you need to make sandwiches and coffee, etc., the average cost of these has gone up 7.7% in the past year.  Meanwhile, your customers are really starting to feel that cost-of-living pinch - their rent or mortgage repayments are going up, and their energy bills and grocery costs are mounting. This means there isn't much left to spend in your cafe at the end of the month. 

As the cafe owner, this leaves you in a tricky situation - your costs are rising, but your capacity to raise your own prices to cover this is limited because your customers are really sensitive to price rises, as they’re trying to balance their own budgets at the moment. So, what can you do? Louise Southall, Economist at small business accounting software platform Xero, weighs in below.

How can one stay profitable during this high inflation period?

This is where small business owners need to take advantage of the close relationship they have with their customers and the fact that being small allows them to be agile. This makes it easier to change your offering quickly if something suddenly isn't selling - don't keep offering products just because they sold well last year when the environment was completely different. 

You can also use a weekly or daily special to move items that aren't selling at full price. This moves stock, gives your customers a discount and doesn't lock you in to a permanent lower price on that item. 

Further, think about implementing a loyalty program for those customers who keep on coming to you; for example, our Atlanta cafe owner might make every 11th coffee free.   

Tough times are also an opportunity to review your business and see how you can improve the way you operate it. What can small businesses do to support profitability during inflation?

Adopting digital tools is a great way to make sure you’re working smarter, not harder. Not only do they remove at least one of the hats you’re wearing on a daily basis, but they also integrate across many different functions of your business. Xero, for example, supports cash flow forecasting. Looking back at your past cash flow can help discover patterns for your business and give you an idea of how much money your business needs each month to cover costs. This can help with budgeting by understanding the ebbs and flows of your business and help inform decisions about future spending - something that’s integral to maintenance and growth, particularly during inflation.

Louise joined Xero in mid-2020 as part of the Xero Small Business Insights (XSBI) team. The XSBI program uses the anonymised and aggregated data of Xero customers to inform decision-makers about the latest trends in the small business economy in order to support small businesses.

Louise has over 25 years experience in economics and business advocacy working with multiple business organisations, councils, government agencies and charities. Her work has covered a broad range of economic and business-related policy issues, membership projects and thought-leadership research. She has a Masters of Economics from Macquarie University and a Bachelor of Economics (hons) from the University of Newcastle.