I’ve been through enough crises to recognise the feeling: at first it’s a headline, then it becomes an invoice. That’s what inflation looks like in the spring of 2022. In the eurozone and the United States, prices are rising at the fastest pace in several decades. In Romania, annual inflation went above 10% in March. Energy has been getting sharply more expensive since last autumn, and it jumped again after Russia invaded Ukraine. For a small or mid-sized business, this is no longer macroeconomics. It’s this month’s margin.
In 2009 I learned the hard way what it means to be unprepared: I sold the majority stake in my online businesses under pressure, because the alternative was bankruptcy. I wrote about it in what I learned from 20 years of entrepreneurship. Inflation is a different kind of crisis from that one, or from the pandemic that locked us indoors, but the principle is the same: whoever sees the numbers early and reacts calmly wins. Below is what I would do right now, as an entrepreneur and as an advisor to a few startups. This is not financial advice, just the common sense of someone who has seen a few storms.
1. Know your real unit cost, monthly, not yearly
Most small companies calculate their costs once a year, during budgeting, and then live off memories. When prices move from one month to the next, January’s calculation is fiction by April. Rebuild the full cost of each product or service every month: raw materials, packaging, transport, energy, labour, fees. Say you run a small bakery: flour, gas and electricity have each gone up by a different percentage. If you don’t put them all in the same spreadsheet, you don’t know which products make you money and which ones you’re paying to sell.
2. Raise prices early, gradually and transparently
Many entrepreneurs instinctively postpone a price increase “just one more month”, afraid of losing customers. The problem is that with inflation every month of delay eats into your margin, and you end up with one big, sudden increase, which is exactly what scares customers away. Small steps, announced in advance and explained, work better.
- Say openly why: energy, transport and raw material costs are public knowledge, and people feel them at home too.
- Add value where you can: faster delivery, a longer warranty, an extra service that costs you little.
- Protect your key customers: a guaranteed price for a few months, or a staggered increase for those who bring in most of your revenue.
- Review your range: sometimes it’s healthier to drop an unprofitable product than to subsidise it.
3. Reread your contracts
One-year contracts with fixed prices, signed in a low-inflation world, can turn into a trap. Look at what you’ve signed with customers and suppliers. For new contracts, discuss indexation clauses tied to a clear benchmark, such as the consumer price index or the price of a raw material. Shorten the validity of your quotes: a quote valid for 90 days was normal two years ago; 15 or 30 days is more prudent now. That’s not unprofessional, it’s realistic, and serious customers understand it.
4. Inventory, suppliers and cash
Supply chains haven’t fully recovered from the pandemic, and the war has added more uncertainty. It’s tempting to stock up “while it’s still cheap”. Sometimes that makes sense, for essential, fast-moving items. But inventory is locked-up cash, and cash is oxygen. Negotiate better payment terms with suppliers, find a second source for anything critical, and track your cash flow weekly, not at the end of the quarter.
On debt, watch out for variable rates. The National Bank of Romania has been raising its policy rate since late 2021, the Fed started in March, and the ECB hasn’t moved yet, but the pressure is obvious. If you have variable-rate loans, run the numbers on a higher-rate scenario and see whether you can carry it. If not, talk to your bank now, not when you’re already behind on payments.
5. Margin before volume
In good times, many entrepreneurs watch revenue. With inflation, revenue can lie to you: it grows because prices go up, not because you sell more. Track gross margin per product and per customer. Selling a bit less at a healthy margin beats selling a lot at zero margin. Aggressive discounts to “keep the volume” are, in this context, an elegant way of losing money.
6. Energy is no longer a minor cost
For many companies, the energy bill used to be a line nobody read. Now it’s near the top. A few simple things help: an energy audit, LED lighting, equipment that doesn’t stay on overnight, shifting working hours where possible. For businesses with a roof and high consumption, solar panels have gone from a “green” idea to a business calculation. It won’t solve everything, but every percentage point counts when margins are tight.
7. Good people: balance, not panic
Your team feels inflation just like you do, at the supermarket and at the petrol station. Salary pressure is real and will grow. You can’t give everyone raises that match inflation, but you can be fair and predictable: explain the company’s situation, prioritise key people, consider performance-linked bonuses instead of fixed raises you can’t sustain, and benefits that matter today. Losing a good person over a small pay gap costs far more than that gap: recruitment, time, unhappy customers.
8. Don’t cut marketing blindly
The first budget cut in a crisis is almost always marketing. I understand the temptation, but it’s often a mistake. When competitors disappear from view, there’s more room for you, at lower cost. And customers remember who stayed visible and who went silent. Cut what doesn’t bring measurable results, move budget towards channels that convert and towards customers you already have, but don’t vanish. I saw this in 2020 too: those who kept communicating came out stronger.
9. Plan in scenarios, not certainties
Nobody knows how long this inflation will last. Last year central banks said it was transitory; now they’re saying something else. So don’t build your budget on a single forecast. Draw up three scenarios: one where costs stabilise by the end of the year, one where they keep rising at the current pace, and a pessimistic one, with even pricier energy and falling demand. For each, write down in advance what you’ll do: which costs you cut, which prices you adjust, which investments you postpone. When the moment comes, you don’t decide in a panic, you just execute the plan.
Final thoughts
Inflation isn’t a catastrophe for everyone. It’s a test of discipline. Companies that know their numbers, talk honestly with their customers and their people, and don’t just wait for the storm to pass will come out of it stronger. As I wrote in my lessons from 2020, crises don’t create weaknesses, they just expose them.
How are you coping? Have you already raised prices, renegotiated contracts, or are you still waiting to see what comes next?