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Switching Things Up: Maintaining Profit During Inflation

As inflation increases and consumer purchasing power decreases, business leaders are encouraged to reexamine their business plans to address reduced spending.

“Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” - Ronald Reagan

Inflation 101

  • Inflation has continued to persist, placing continued pressure on families, businesses, and customers. This has led to a decrease in consumer sentiment and spending.

  • “The CPI measures inflation as experienced by consumers in their day-to-day living expenses” (Bureau of Labor Statistics, 2022a).

  • In July 2022, CPI (Consumer Price Index) decreased slightly from 9.1% to 8.5% (US Fred). Though, inflation is still elevated from June 2022 wherein the CPI experienced the largest increase in a 12-month period in 40 years (Bureau of Labor Statistics, 2022b).

  • With a majority of income going to gas, food, and housing, households are preparing to cut back on extra or unnecessary expenses such as dining out (53%), monthly subscriptions (35%), brand name products (32%), and vacations (40%) (Richardson, 2022).

  • Business activity has slowed in the United States, Europe, Japan, and China. Pointing to this sharp decline are inflation-induced higher prices that weaken consumer demand. Additionally, the war in Ukraine has challenged traditional supply chains. Rising interest rates to tamp down on inflation, plus higher prices and supply chain shortages, point to lower global GDP activity. (Mohamed A. El-Erian)

“To improve is to change; to be perfect is to change often.” - Winston Churchill

How leaders are responding

  • Leading businesses are reevaluating their marketing and services to account for decreased consumer spending.

  • Private Equity investors in technology fields are advising funded companies that they must ‘adapt to endure’ and safeguard their cash, as it may be a while before credit is cheap again (Sequoia Capital, May 2022).

  • Large companies like Best Buy, Ford Motor, HBO Max, Peloton, Shopify, Re/Max, Walmart, and Wayfair have announced layoffs in recent weeks. “PWC reported in a new survey that 50% percent of businesses are considering layoffs” (CNBC, August 2022).

  • High technology firms are also trimming staff and budgets more deeply and delaying spending as it becomes increasingly difficult to continue operations with declining revenues (Crunchbase, August 2022; see also

    • Takeaway strategy: if you seek talent, capture the best talent from companies that are downsizing and understand your financial metrics (like revenue-per-employee ratio) vs your industry to avoid over staffing. At this time, it’s about survival of the quickest, scaling simplicity, doubling down on great talent, retaining your best people, adjusting your financial outlooks, tightening up your value proposition, and getting profitable now.

  • The Society for Resource Management (SHRM) suggests five options for reducing operating expenses without going to full layoffs: furloughs, job sharing, pay cuts, reduction in job benefits, contract labor (SHRM).

  • After losing “nearly 1 million subscribers… for the first time in nearly a decade,” Netflix plans to offer customers a cheaper, ad-supported subscription and plans to “crackdown” on password-sharing (Krouse, 2022).

    • Takeaway strategy: Find a way to make your product cheaper while still making profit, and double down on areas of the business where money is lost—for example, in Netflix’s case, password sharing.

  • 800 Degrees Pizza has partnered with an automated pizza-making service called Piestro. This service increases profit margins by 33% by reducing labor, real estate, and food cost expenses (Piestro, 2022).

    • Takeaway strategy: reduce production and labor costs with automation to increase profit margin.

  • Major retailers like Walmart, Target, and Gap have reduced prices on non-essential items they have gained an overstock of. Walmart CEO Doug McMillon is quoted as saying, “if we think about the most value-conscious customer group, we’re watching that group” (Sirtori-Cortina and Smith, 2022).

    • Takeaway strategy: reduce product prices to increase sales.

  • A survey from PwC indicates that 50% of business leaders are expecting to conduct layoffs or reduce “their overall headcount.” In 2022 alone, 73,215 employees have been laid off according to, a public layoff tracker.

    • Takeaway strategy: reduce unnecessary or unsustainable headcounts when necessary for financial health.

  • From CNBC, Google’s CEO Sundar Pichai created a new effort for employees to increase their efficiency called the “Simplicity Sprint” stating that “Google’s productivity as a company isn’t where it needs to be” (Elias, 2022). They plan on using this initiative to “crowdsource ideas for quicker product development”

    • Takeaway strategy: increase efficiency to address labor shortages, increase innovation, and increase profitability.

  • 38% of business leaders cite finding the “right talent,” as opposed to any talent, as a business “risk” second only to cyber security. According to PwC, “After a frenzy of hiring and a tight labor market over the past few years, executives see the distinction between having people and having people with the right skills” (Pwc, 2022).

    • Takeaway strategy: reevaluate hiring practices. Are you hiring anybody and everybody? Or, those with the right skills necessary for your business to thrive?

  • As seen in all the examples above, businesses are learning to be agile and adjust to the changes in inflation, labor shortages, consumer spending, and other economic challenges. Review key strategies that make businesses agile in our insights article, The Key to Thriving in Turbulent Times: Finding Your Pivot Points.

    • Takeaway strategy: Businesses that embrace agility and respond to economic challenges by changing the necessary areas in their organization thrive in times of uncertainty.

Questions to consider

  • How can you make your products or services more affordable to customers with reduced purchasing power?

  • Where in your business can you reduce costs? Labor? Supplies? Real Estate?

  • Are there areas in your business that are currently wasting money? How can this be minimized?

  • How has inflation affected your customer base? How can you account for these effects?

  • How can you simplify your business to increase efficiency?

  • How can you reevaluate your hiring practices? Are you hiring the right people?

  • How agile is your business? How quickly can you respond to changes in the economy?

Closing statement

With decreased purchasing power, customers are reducing their spending in a variety of areas. Businesses that are aware of this can find ways to make their product or service more accessible to financially strained households. They can also find areas within their own businesses to reduce costs and increase efficiency, ultimately increasing profit margins, and making up for reduced consumer spending. Businesses made up of the right talent and that are able to quickly respond to economic changes, can better withstand the effects of inflation.

“Your most unhappy customers are your greatest source of learning.” - Bill Gates

Want to learn more about beating inflation? Check out Episode 1052 of the Arete Coach Podcast, “Navigating Inflation” for more insights and strategies. And if you think your industry is facing a financial storm, check out Episode 1083, “Surviving Economic Tsunamis.


Bureau of Labor Statistics (a) . (2022, March 23). Consumer Price Index Frequently Asked Questions : U.S. Bureau of Labor Statistics. The United States Bureau of Labor Statistics.

Bureau of Labor Statistics (b), U.S. Department of Labor, The Economics Daily, Consumer prices up 9.1 percent over the year ended June 2022, largest increase in 40 years at (visited July 21, 2022).

Elias, J. (2022, August 1). Google CEO tells employees productivity and focus must improve, launches “Simplicity Sprint” to gather employee feedback on efficiency. CNBC.

Lacurci, G. (2022, August 23). 50% of employers expect job cuts, survey finds. Here’s how to prepare for a potential layoff. CNBC. (n.d.). - Tech Layoff Tracker and Startup Layoff Lists.

Piestro. (2022). Piestro | The Future of Artisanal Pizza.

PricewaterhouseCoopers. (2022). PwC Pulse Survey: Managing business risks. PwC.

Richardson, B. (2022, April 5). CNBC|Momentive Poll: Financial Literacy 2022. Momentive.

Sirtori-Cortina, D., & Smith, A. N. (2022, June 15). Inflation-Battered Americans Get Chance to Go Bargain Hunting. Bloomberg.

Sorensen, S. (2022, June 2). The Key to Thriving in Turbulent Times: Finding Your Pivot Points. Arete Coach.

Copyright © 2022 by Arete Coach LLC. All rights reserved.


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