Though inflation has been a known problem for decades, it is only recently that we have seen it affect our daily lives with greater frequency. The cost of food, housing and even healthcare is on the rise – and so are costs at physical security companies. But how can you make sure your business does not get caught off-guard by these rising costs? The answer lies in preparation and negotiation skills.
The cost of everything is on the rise. Inflation is real, especially for physical security companies.
Inflation is a real problem for physical security companies. Inflation is defined as the increase in the average price level of goods and services in an economy over time. It is a broad term that can apply to many distinct aspects of life, including wages, utilities, insurance, and software. Inflation is caused by many factors including supply and demand, but it is often exacerbated by government policies such as quantitative easing (QE), which artificially increases the money supply.
Inflation has been on the rise since 2009 due to low interest rates set by central banks like the Federal Reserve Bank to stimulate economic growth after 2008's fiscal crisis hit bottom at around 6%. The aim was to get Americans and businesses back on their feet again by encouraging spending through lower borrowing costs; however, this strategy has only made things worse because now people and businesses are paying more for everything they buy.
Physical Security Companies Need to Keep Up with Inflation
Physical security companies need to keep up with inflation to stay competitive. This means raising prices on services but doing so responsibly. You cannot just increase rates overnight because doing so would lose you customers and make you look bad. Instead, provide your clients with ample notice periods by sending out reminders via email and snail mail of price increases. While it may seem like an excuse, be honest with your clients: rates are rising because of inflation, the increase in living wages, and more costs associated with providing physical security services.
Inflation affects workers and executives in separate ways.
Workers and executives can be affected in diverse ways by inflation, but both can feel the impact of higher prices. For workers, inflation is often a reason to leave their job or move to another area where the cost of living is lower. Inflation also affects how much money they make; this effect is more pronounced on lower-income individuals who have fewer savings and more debt.
For executives, inflation makes it harder to keep up with rising costs such as energy costs and utilities because these expenses are usually fixed within certain budgets set by management teams before they were made publicly available. While some CEOs may decide not to raise prices on services that could result in lost clients over time, they do have to find other areas to cut budgets. This could result in layoffs, most notably in the mid-management areas.
Business owners are also bracing for the impact of lower profits due directly to related factors like decreased sales and consumers' unwillingness/inability to afford services at current prices. Physical security companies are now looking for additional revenue streams to generate profits without increasing costs. For example, some companies are moving from strictly staffed guard services to providing training and consulting services to in-house security teams and smaller companies that might not have as robust a budget to spend on guards.
Be ready to negotiate due to rising costs.
You may be able to negotiate with vendors and clients. It is widely known inflation is a problem, so clients and vendors are prepared to come to the table to find alternative ways to meet their needs.
- Vendors: You can potentially ask them to reduce their prices or offer a discounted rate if you have a long-term relationship and are willing to give them your business in exchange for the lower price. A great area to negotiate these costs is with insurance providers and hard goods like office supplies and even overhead expenses like facilities rentals.
- Client: Consider offering your clients a discount if they pay for services on time and in full. A client who does not pay on time is more likely to pull the plug on their contract because they need cash now rather than later—and this could leave you without any income until they settle their debts.
Another option is to offer a price break if the client needs services on short notice. If you are not busy at the time, this could be a solution where everyone benefits. For example, offer discounted services for temporary guard duties. Leverage clients that have recently taken their guard services in-house. Let them know you are offering a discount on temporary hires, especially around the holidays. Have a stable group of guards able to work last-minute shifts.
Make sure your business is saving money where it can.
Make a list of all the supplies you use and then consider which items are generic, or if there are other suppliers that will cost less. Consider moving completely to the cloud rather than having on-premises servers that are costly to rent. Moving to the cloud can decrease your utility expenses. Consolidate your HR processing systems to an all-in-one provider for workforce management and administrative functions. Reduce your printing costs by going fully digital. No more paper, no more toner, and you are saving the environment, which would be a tax break for your company.
Inflation is a challenge for many businesses, but it is one that can be managed. Physical security companies need to be especially aware of this because they are often operating in an environment where prices are constantly rising, and consumers are more likely to make cost-conscious decisions. However, by knowing how inflation affects your business and how to deal with it appropriately, you can minimize its negative impact on your bottom line while still providing the best service possible.