Tuesday, June 17, 2008

Small Businesses Attempt To Tackle Inflation Creatively

working from homeThis just in: Inflation is real and the Fed may not be able to stop it. That’s the reality for small businesses as they are forced to deal with the strain caused by rising food and energy costs.

The dramatic growth of the suburbs, as a result of rising home prices, combined with $4 per gallon gasoline is creating significant pressure for businesses with employees who commute. “Emerging suburbs and exurbs -- commuter towns that lie beyond cities and their traditional suburbs -- grew about 15% from 2000 to 2006, nearly three times as fast as the U.S. population,” according to the Detroit Free-Press.

This hits small businesses the hardest, since they tend to employ a greater percentage of employees at entry level salaries, and thus may have more employees who have moved further away to find affordable housing. This leaves many small employees in a bind when combined with an economy that may not support price hikes to consumers.

Some business, however, are finding creative ways to deal with the problem:

Virginia Commonwealth University Health Systems gave away $1 million to its 7,200 employees as a one-time bonus to help ease the burden of rising commuter costs, according to the Richmond Times Dispatch.

Du-West Foundation Repair recently moved 90 workers to a 10-hour, four-day workweek, according to the Dallas Morning News. Du-West is not alone. The city of Birmingham, Alabama will move to a four-day workweek for more than 4,000 employees July 1, according to Inc. magazine

Other solutions have been adopted by various businesses, including:

  • Offering incentives for riding mass transit, including purchasing bus or train passes for employees.
  • Offering carpool incentives, such as prime parking spaces or cash incentives for carpool riders/drivers.
  • Offering additional work from home days for employees capable of telecommuting.

At NuWire, we’ve decided to explore the possibility of transitioning many of our positions so employees can telecommute. This creates a unique set of challenges but also offers the potential of a win-win for employer and employee. Having fewer employees in the office would allow us to reduce office space and some office costs. Employees would save money on gasoline, car maintenance and insurance and time lost commuting.

Although it remains to be seen whether we can create a telecommuting plan that will work for all involved, it is clear that we are not the only small business looking to retain good talent by finding creative (and proactive) ways to tackle inflation without raising prices (or in addition to raising prices).

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