Inflation Is Hurting Profit Margins — Here’s How to Fight Back

For more than a year, financial pressures have dominated the small business landscape. Intuit QuickBooks research confirms that sticky inflation and rising costs continue to be the No. 1 concern for nearly half of all business owners, a trend that started in 2023. This climate of uncertainty has forced difficult decisions, with 33% using personal cash reserves to manage expenses.

But that’s only half the story. Despite these challenges, small businesses are revving up their efforts to drive growth by identifying opportunities to pivot to proactive investment strategies. And those strategies are working: 57% of small businesses expect revenue growth this quarter, and 44% are already seeing gains.

Small businesses are demonstrating confidence by moving from defense to offense. Nearly two-thirds plan to invest heavily in the months ahead to drive expected revenue growth. Their focus is targeted toward two core areas: boosting customer demand through sales and marketing and implementing new technologies to achieve greater operational efficiency.

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Modernize your sales and marketing strategy

For many businesses, marketing remains the foundation for driving demand, with more than half of all respondents saying that launching a successful marketing campaign would be the most beneficial way for them to grow.

As you evaluate your current marketing and sales efforts, it is important to align your strategy with changing consumer behaviors and high-impact marketing techniques. As you determine the best ways your business can meet the demands in the market, here are some considerations as you look to modernize your strategy:

• Focus on market segmentation. Market segmentation is the process of dividing your customers into smaller, more manageable groups that share common characteristics (think age, lifestyles, location, etc.) allowing you to customize messaging, promotions and new product offers. Consider leveraging behavioral data on your customers from within your marketing automation tool for segmentation.
• Meet your customers where they are. Consider augmenting your current marketing mix by expanding the number of channels and technologies to help you extend your reach. Build campaigns that differentiate your brand by additional channels such as online marketplaces (think Etsy or Facebook Marketplace) in addition to more traditional and social media platforms.
• Deploy programs to drive real customer engagement. Invest in efforts that will drive customer engagement and keep your customers interested in your brand. Consider adding personalized experiences, facilitating brand communities and thinking about reaching your customers in new ways — SMS for example, is a great way to target your marketing campaigns to customers.

Optimize your operations with new technologies

To truly streamline, manage and scale your business, having a defined digital tool and technology strategy is non-negotiable. Digital transformation isn’t just about using the most apps; it’s about systematically integrating new technologies to optimize every aspect of your operations in the work you are doing. Wherever you are on your digital integration journey, successful expansion requires a focused plan and consideration of the tools available and how they can meet you in the work you are trying to do. Consider these fundamental areas when developing your next-generation technology investment strategy:

• Consider your existing workflows — and automate: Strategic automation is the most powerful tool for optimizing business operations and minimizing the risk of human error. By replacing time-consuming, manual processes like tagging expenses, paying bills or managing payroll with an automated digital platform, businesses can achieve massive time savings and significant cost reductions. Focus on integrating digital tools to handle the heavy lifting, shifting your team’s role from execution to review and strategy.
• Integrate artificial intelligence (AI) to anticipate what’s next: Move past AI that just helps you react faster. The next generation of technology, known as agentic AI, is designed to be fully proactive. It monitors your business activity in the background, for example, automatically reordering low inventory or flagging vendor issues before they cause project delays. Some advanced tools can even negotiate payment terms or adjust orders based on your financial forecasts. The result is a major operational gain: fewer bottlenecks, no last-minute scrambling and maximized time to focus on strategy rather than logistics.
• Evaluate the ROI on your tools and ensure your spend is driving impact: When adopting new technology, treat every purchase as a strategic investment requiring a clear, quantifiable return. To maximize value, move past trends and focus on measurable outcomes. Start by defining the key performance indicators (KPIs) each tool must improve — such as reducing payroll processing time, decreasing invoicing errors or accelerating cash flow. The best technology delivers a clear benefit that outweighs its cost, ensuring that if a tool doesn’t contribute directly to efficiency or growth, it’s accurately accounted for as an expense, not an investment.

Building for tomorrow, today

While the current economic climate is challenging, many businesses are realizing that there is an opportunity to embrace strategic investment over hesitation. By creating smart, focused strategies today, your business will not only successfully navigate current headwinds but will also establish the resilience and operational efficiency necessary for maximizing future growth.

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