From inflation to supply chain bottlenecks to labor shortages, business owners are facing a number of challenges. According to a recent survey by the National Federation of Independent Business, of the aforementioned challenges, business owners have cited inflation as the single greatest pain point. The survey reports that three out of every four business owners reported inflation negatively affecting their business over the past six months. For the full year 2021, the consumer price index came in at a scorching 7%, the highest 12-month increase since 1982.

The rate of inflation has largely been driven by supply chain bottlenecks created by disruptions from COVID-19 and a soaring recovery in demand, without enough inventory to keep up. Additional inflation has been driven by the increasingly competitive labor environment, which has led to hourly wages growing at over 4% according to Paychex | IHS Markit Small Business Employment Watch, the fastest pace since the study began 10 years ago. While inflation is expected to ease throughout the year as supply chains continue to loosen, uncertainty around COVID-19 is a key variable that could lead to inflation sticking around longer than anticipated.

In light of this economic backdrop, below are six actions business owners should be considering now:

1. With the prospect of rising costs in 2022, owners may want to consider building up additional inventory at the current, presumably lower, prices.
2. Business owners should look at opportunities to sweep extra cash into interest-bearing accounts. To battle rising inflation, the Federal Reserve is expected to increase short-term interest rates three to four times in 2022. As interest rates increase, so should interest rates on money market sweep accounts.
3. As interest rates increase, so will the cost of debt. Owners with existing debt should consider looking at opportunities to refinance in anticipation of rising loan rates.
4. Additionally, business owners should consider refinancing variable rate debt, such as credit card debt, into longer term and potentially lower fixed rates.
5. Investments in technology will also be important. Strategic investments in technology can allow a business to increase automation, resulting in increased productivity with the same or smaller workforce.
6. Lastly, now is a great time to review your investment portfolio with your financial adviser to ensure your investment portfolio is strategically positioned for both inflation and the prospect of rising interest rates.

Al Yambor is a Senior Director, Family Wealth, at Sequoia Financial Group, LLC. Contact him at ayambor@sequoia-financial.com or visit www.sequoia-financial.com.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.

The  views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.