Walking the Tariff Tightrope: How Small Businesses Can Find Their Balance

Running a small business isn’t for the faint of heart. As an entrepreneur, you wear every hat from supply chain specialist to chief marketer to everything in between. Throw in today’s fluctuating status of tariffs, and small business owners face potential chaos in their operations and revenue stream. While you can't control government policy, you can take steps to mitigate its impact and even turn tariffs into opportunity.

The most significant effect of increased tariffs is the higher import costs and supply chain disruptions for small businesses. Tariffs can increase the cost of importing goods and materials for small businesses, straining cash flow and negatively impacting profit margins. A natural reaction is to pass increased costs onto customers, but that could harm sales and relationships as customers seek lower prices elsewhere.

Even if your business can absorb the higher prices, tariffs can disrupt supply chains, making it harder to acquire needed goods and materials in the first place. Additionally, other countries often retaliate by imposing their own tariffs on U.S. exports. In response, consumers in those countries may curtail purchasing U.S. goods, hurting small businesses that export their merchandise.

While this may sound like a hopeless situation for small business owners, there are ways to manage tariffs and minimize their impact on your operations:

1. Reassessing supply chain 
Tariffs can affect your supply chain at every level. Don’t be caught short: Scrutinize from top to bottom. Once you determine which products or materials are affected, search for lower prices with new suppliers here and abroad – U.S.-imposed tariffs vary widely among countries. Also do the homework to see if you can substitute lower-priced products and materials without hurting quality. 
 
2. Negotiating with suppliers
Even without Walmart's bargaining power, you should discuss price or contract modifications with existing suppliers. A small discount on an important good or material can make a big difference in your bottom line.

3. Evaluating and adjusting prices
Depending on your review of your supply chain and negotiating success with suppliers , you may need to adjust prices upward to reflect higher costs. Before making changes, consider looking at your competitors and seeing if they have made any major pricing changes. You may need to take on more cost than originally anticipated to stay competitive in the market.

4. Informing customers
Use your social channels and email lists to let your customers know about pricing changes: Try driving home the idea that “we won’t scrimp on quality” to lessen the blow Alternatively, you can tout the switch to more affordable made-in-the-USA items. Chances are you’ll absorb some increases and pass on others, so let customers know you understand their frustrations but also are committed to staying in business to serve them. 

5. Streamlining operations
With an eye toward cutting overhead and internal costs, consider eliminating slow-moving items, automating or outsourcing tasks, and renegotiating service contracts and leases. 

6. Considering a line of credit
This can be a helpful emergency tool as you adjust to tariffs. It allows you to draw funds only when necessary and then only pay interest on the money you borrowed. 

7. Seeking professional advice
You can’t optimize operations in a vacuum. Consult with financial advisers, accountants, business bankers or mentors to seek customized guidance and support. Industry trade groups and associations also can be a source of information and an ally, as they often lobby for relief for their members.

While those strategies are useful for handling tariffs in the moment, small business owners can do more to safeguard themselves from disruptions before they happen. Use these strategies to prepare for future economic changes:

1. Managing cash flow
Focus on essential spending, forecast future scenarios, and build a strong financial buffer.

2. Investing in innovation and technology
Build upon your immediate efforts to streamline by exploring how technology like cloud platforms and data analytics can improve operations, like  tracking inventory and the movement of your goods in real time.

3. Diversifying revenue streams
Explore the possibility of introducing new services or products or developing new audiences to mitigate future downturns.

4. Keeping informed
Keep track of industry trends and economic news to better prepare for potential changes.