When Warren Buffet gets serious about inflation, we should all get serious about inflation.

Further to last week’s blog on the subject, it was nice to receive some favourable comment and a request for further information on methods by which a small business can get inflation to work in its favour.

The immediate response is to admit that it is not easy. The busy entrepreneur needs to make himself a master of detail. Indeed, his competitive advantage is the fact that he is on top of those very details which his competitors, suppliers, and customers are too busy to consider.

Here are some suggestions:-

1   If your pricing strategy is based on “cost plus”, i.e. total costs plus profit, calculate the costs using the “replacement value” of your stocks and fixed assets, i.e. what you would have to pay for them, rather than their “historic cost”, i.e. what you actually paid for them;

2   When selling try harder to get cash up front, when buying try to get credit;

3   Get fixed price quotes when buying, but quote variable rates when selling;

4   Make sure that any surplus cash you have in hand works for you by investing in assets which are likely to grow in value faster than inflation; and

5   When doing business abroad, keep an eye on not only exchange rates but on the varying inflation rates in different countries.