Inflation hurts everybody– customers, business owners, buyers, renters… you get the point. There are few small businesses that haven’t been negatively impacted during periods of inflation, from supply shortages, fewer opportunities for investments, or something else. In this week’s session, we asked the audience how their businesses have felt the effects of recent inflation and shared some advice on keeping your business afloat.
Your business can survive inflation, and even come out stronger!
Adapt Your Business to the Current Climate
Reevaluate your current predicted revenue– Is your product or service necessary during a period of inflation? Will you still be able to price competitively? Plan for manufacturing and production cost increases and adjust accordingly to maintain profitability. When increasing your pricing, be intentional of competitors’ numbers and stay as low as possible, reducing overhead expenses wherever possible. Nobody wants higher costs, but customer loyalty is key here– maintaining strong customer relationships likely means continued support.
Re-evaluate Weaknesses and Strengths
While looking at your business structure under a microscope can feel stressful, view it as an opportunity to identify and strengthen existing inefficiencies. You might be surprised to find processes that can be automated or new low-cost, high-impact strategies. Planning measures like securing long-term contracts with suppliers and focusing on employee and customer retention will save you time and money in the long run.
Your business can survive periods of inflation and even come out stronger. Listen to the full session above for even more on navigating this as a small business owner!
The Serial Entrepreneur EP53
Today we’re talking about inflation friend or foe and, entrepreneurs go through phases.
We all do. It’s like a roller coaster and we have to worry about selling new products or services. We have to worry about making payroll with the worry about paying our property taxes. We have a lot of challenges, but if you add to those challenges these external threats, these external issues that can occur, it becomes even more challenging.
And I think there isn’t any one individual or any one startup that hasn’t been affected by inflation. So we thought this would be a really interesting topic to take on today to really understand, how is it, how is inflation impacting startups? They’re also [00:01:00] challenging stories. And we want to hear from you. So we’re going to do open mic today.
And I know Michele, you’ve got some personal stories you want to share as well. Absolutely. And really this is one of my favorite subjects. It’s so deep. It’s confusing, let’s all admit that. Especially if you’re listening to Bloomberg and hearing about inverted curves that has, my God, what do I do?
Like you just want to pull your hair out, just trying to figure out what to do. But for us first, I want to just give a little bit of a story of what we face. Of course, we’ve all been hearing on the news. Oh my gosh. Supply chain. Most of the country probably didn’t even know, or think about, let’s just say, think about supply chain.
For one of the companies that I’m involved in meowing tents, we’re a retail company and my gosh did it hit us hard. And of course it started all with COVID as we all are familiar with. And the way that inflation has, was [00:02:00] influencing us was we basically stopped ordering from China.
Why because the demand and the availability of gosh, who would have thought of it, shipping containers and ships became horribly expensive. Literally, and this is absolutely true. It’s not fake news stuff. We went from doing 40 HQ, a 40 high container that were, around $4,000 before COVID, while we thought that was so much right, to bring our merchandise over from China to the U S east coast went from $4,000 to 20 for the health of dollars.
Like it’s almost unimaginable that could happen. And don’t forget, it was also not to be political. That was also. The very negative effects of some of the very high tariffs rates, the increases, we were familiar with. There were certain [00:03:00] products that were in categories where there were up to 25% tariffs, that was under the previous administration.
Nonetheless, it hit and it hit hard and we stopped. We had to literally cease doing any ordering of merchandise that was shipped from China. It’s been a very, tough I’ll say well over a year for that, however, the good news is now is we are starting to see a decrease there, but that is, a classic example of one of the components that a flight inflation affects that can kill you, which is price.
Meaning pricing to get your merchandise, whether it be raw material or what we call a landed cost, or just even services or employees. It’s, that’s how inflation has, personally affected one of the companies that I’ve been [00:04:00] involved. So for us, we’re talking here today. We’re saying, oh my gosh, is it a friend or a foe?
Of course I find it a foe, but I also am a person that likes to look at the, silver lining, the silver lining would be, it forces you to be efficient. It forces, it has forced us to look at alternative manufacturing at alternative revenue stream. And it also has caused us to take a real microscope to our costs and.
And now most people believe, oh my gosh, when a company starts cutting costs, it’s just bad that it’s all negative. I can tell you, that’s not necessarily true. If you can cut costs to be more productive, let’s just say there’s fat or there’s other efficiencies you can gain otherwise then in the long run, that is good.
But I want to hear what Cara gay says. And then after that, I’m going to just read some [00:05:00] research that we found I’m free to do that. I don’t want to let a story and go by so quickly. Did you, why couldn’t you just pass the costs onto customers? I’m curious, like, why can’t you just, if your costs go up by 20% or actually it gets, in your case, it went up by 500% for shipping from China, why can’t you just increase those costs to the consumer and that’s and that’s, I know that’s how inflation happens.
I understand. But w why did you make the decision to not. Ship those goods instead of make the decision to just raise prices on those goods. Cause you know, everyone in the United States, they’re all received. They’re all getting the same hit with the same price increases on their cost base. And what went through your mind around that?
Yeah, for us, we know our customers we’re in cat furniture and stuff for cat people like cat trees, cat beds, mountains. What we know is that they are price [00:06:00] sensitive and it is, let’s be honest, it is a discretionary purchase. So we know because we have over the years done a lot of price testing.
We knew that our customer base would not whether, even like a hundred percent markup I mean over the current, retail prices. So for us. We might as well, just shut the doors, hips. Literally, if we were going to, raise our prices to cover all the expenses and don’t forget, I, there are still competitors out there probably with excess inventory, perhaps they have more localized manufacturing, you still have to be competitive call-in so it is a bit of a conundrum for us.
We did start to look for other non oversea sources. I would say that was moderately successful, but still presented a challenge. So for us right now, we’re just, looking [00:07:00] forward to going back to our manufacturers and the impacts of, more normalized. I don’t say. Yeah. So it’s interesting.
You say it’s discretionary. And so that the more discretionary your goods are, the the less ability you have to raise prices. But if they’re essentially, like an automobile, we have to drive a, if there are essential oils, then they can increase prices on those. And consumers will continue to purchase those products at higher prices because you have to get to work or you have to get to the store, you have to eat, you’re going to order by chicken, no matter what, you’re going to buy eggs, you’re going to buy all of that.
Those goods, because there are essentials. Is that sort of what your, so your, in your particular case, the products were more discretionary. They’re more fun based products. You could argue the cats need these toys too. Oh yeah. So we do argue that it doesn’t make it true.
Yeah that’s what we’ve experienced. And like I said, the friend part of it, it [00:08:00] will force people out of business. Okay. I’m just, maybe this sounds draconian, competitors perhaps, but it really is causing an at least in our situation and I’m sure many other people to focus and to really examine what our cost structure is and how to become more efficient.
And yes, we are raising prices a little. For us, we had a pricing marketing strategy that was very centric around a lot of aggressive promotional cells. So what we’re doing on those, this, we. Less than that activities. We still, whatever, instead of 40% off, it might be, 20% off. And, instead of like just selling out and selling down on everything, we’re keeping a very close eye on inventories.
And when it starts to get low, w we’re not like aggressively discounting them because we need that inventory. So that’s the bright side. It’s, I’m not gonna, not to misrepresent. It has been extremely painful. And I do expect it’s going to [00:09:00] be painful column for probably another year.
Yeah. It’s just interesting how different businesses benefit and other businesses are harmed by the inflation rate. And shipping containers going from $3,000 or $4,000 to $24,000 from China. That’s unbelievable. And just unbelievable, you think about some other businesses, like we also have a vacation rental business and it seems to be benefiting from inflation in the sense that, the housing prices go up and, the our investors are benefiting from the fact that as the prices go up, as the inflation goes up, it also the price of real estate goes up and yet our boring costs have been fixed.
I know we had a 30 year mortgage at 3% and nowadays now, again, that they’re trying to fix that I know today, I think it hit almost 5%. The borrowing costs, which again is, another negative impact of inflation is that it [00:10:00] increases boring costs for new businesses or new startups. Unless, but the ones who benefit are the ones who had the loans put in place prior to.
The big surgeon, interest rates as well. But yeah, it’s interesting how many different companies are affected. And I know in the audience you’re, you probably have a company affected Roland Warren. We’d love to hear from your role. And again you’ve probably been impacted by inflation and you want to share with us, we’re doing open mic today, just a quick round table conversation about, how inflation is impacting startups.
Just another anecdote, I had, sorry, I’m a little out of breath. I was doing some exercise, but my mother, she don’t, she’s a restaurant on her and she, when the pandemic hit, she basically wanted to pivot her business to more like a food truck. So she actually purchased one from China and, the food truck itself was probably.
$12,000. It was a trailer and all in for shipping, they [00:11:00] quoted her, 15,000, but once they finished the actual price just jumped up to around $22,000. It basically killed that business model. And she had to pivot again, to try to figure out some other way to take advantage. But yeah, I’ve seen it happen just personally.
Yeah. That’s painful. And you think about small business owners, right? It’s oftentimes their whole livelihood as well as her whole life savings. So we feel for you and your family care go.
Yeah. It’s interesting that they, she couldn’t have that made in the United States. Like why is it that our country and you’re in your case to me, Why is it that what’s right. Our country? This is a global app. Why is it that the United States is so dependent upon, China for the manufacturing of these goods in your case, it was a truck.
[00:12:00] So the idea, they would put a truck on a container, this big food truck and ship it across is that, that was what they were doing there. And in China they’re building it. Exactly. And I think probably the cost was most likely the reason why, but even with that, and, I, when she actually just started talking to me about it, I started telling her that there were other options, she could purchase the other vehicles and retrofit those to, add kitchens and stuff if she really wanted to go to that mobile kitchen type business model.
But yeah, I think relying on China was the major issue. She had to take out another loan. It was just just more and more costs building up. Yeah. It’s unbelievable how many businesses and startups are impacted by inflation. As consumers we hear about it all the time, it really does hurt consumers, especially those on fixed income.
And it hurts. It hurts young people who are trying to get ahead in the world, they wanna, they want to buy their first [00:13:00] home or they, even renting now the cost of renting. And we live in so Florida and the costs of renting have gone up 38% over the last couple of years. It’s just, it’s insane.
I don’t know, young people today they’re faced with these additional challenges and as a startup, thinking about this and, do we try to, do we try to inflation protect our businesses? Do we try to come up with ways that we can, protect ourselves may, maybe.
I don’t know, maybe you pre-buy the containers, Michele May be here, you’re buying them a year in advance so that you don’t get caught on these types of things. What can we do? Like I know we can’t just sit here and complain. We’re here to talk about solutions. What can Careaga’s mother do? What do we do?
Yeah. For us, we CA at least what I found, there’s no such thing as pre-buying, it’s like Uber, right? These it’s flex pricing, but certainly for us, what it forced us to do is look [00:14:00] at, is there a sources in the Americas, Canada, us, south America, and we’re starting to uncover some of those. For me, that’s a great thing.
It’s never a good thing to be dependent on any one supplier torch, distribution chain anyway. So that’s why I say. I’m up cautiously optimistic that it’s going to, drive some long-term efficiencies. So caribou was your mom able to look into other options, like you said?
Yeah. So we did investigate other options retrofitting other, purchasing. I actually purchased a food truck and, just sought to retrofit it ourselves, but she just took the option to take more money, do more financing and pay the extra money, but it still took some time for her to get her, for her to get our shipments.
So even with that, it was another six months. And this was, last year going into end of last year until this year that it even worked out for her. [00:15:00] Yeah, it’s interesting that you talk about, time to market. So the shortage of goods we experienced that in the real estate business as well, where it would take four to five months to get windows and doors for some of the projects we’re working on.
And I know Michele and I are also involved in a vacation rental business as well. And, the we’re trying to buy pools and uh, sounds like pools, how hard can that be mean? Why is it, and we’re talking about over a year delay right now for pools. And so it’s these delays that can also impact your business as well.
If you run a little vacation rental business or you’re running another type of business and it takes so long for us to get those materials to, to work with so that we can build. And any other thoughts on that, Michele? I mean that whole time, so it’s, I don’t know what you call it. I don’t know, but it’s certainly not just in time.
Look, if we had a crystal ball, we could [00:16:00] all look at, have looked in the future and stocked up, which by the way, there are companies that somehow did that expect actually for processing chips and they they reap the rewards of it, but most of us, don’t have that. Don’t get to do that.
So I would just say it’s we really just have to stay on top of what’s going on in the world. And when we kick this off, I mentioned there were some studies that we were reading. One of them was in the Harvard business review. This was an article that was published in September of 2021. And it was basically strategies to help your company, whether inflation and I thought this was really interesting was they were saying that companies, that weather previous, inflationary periods, of course, they paid attention to the costs of their, their goods and adjusted pricing.
And all the things that are, very in [00:17:00] front of us that we can do, but what their research found that the best performers also took significant steps to boost productivity primarily by cutting costs. We’ve been enjoying very lucrative times, hiring and, in some cases inflated wages, but it’s a chance for companies to reset as well, look around.
Is there waste in your company on spending. But more importantly also, is there an opportunity to improve productivity? So maybe you just through, a couple of people at a specific task that you actually should have automated, like that’s only going to help you in the end, by, establishing those kinds of processes and efficiency.
Really getting transparent about where your resources are going. And I’m not just talking about raw resources, but the most important your human capital. Like how are people spending time and [00:18:00] try to drive those efficiencies? Ergo cutting costs. It’s only going to help us in the end. Roland would love to hear your thoughts on the subject.
And then let’s go to four 20 after rolling. Thanks Colin for inviting me on stage. We always love listening to you. You have such good wisdom. I was. Thank you. So the way I would try and look at this challenges, I think it’s two-fold and one is if your existing business and two, if you’re considering starting up a business or have just started up a business, let’s go with the former.
You already have an existing business. That’s running. What I would do if I were in your shoes is I would grab my PNL and look at [00:19:00] all the cost lines and say, do I need to change my mindset in the way we do things, because I bet that due to inflation, every one of those cost lines is going to increase whether they turn.
Whether it’s electricity energy, whether it may even be staffing costs. So then the question becomes, if you want to not end up reducing staff, because all the staff are needed on deck, then the question becomes, how can you organize things in a different way to ensure that you maximize productivity while managing your cost efficiently?
And that may even include changing your mindset with regards to having an office and [00:20:00] moving to remote, working as a routine rather than a one-off. So it’s really, it’s interesting it’s to do more with less. And you bring up the whole issue of staffing that the, I know in the last report I’d heard, there was a five point, 1% increase in wage costs in the United States.
And, in some industries there really just seems like there’s almost a shortage of staff and people are just bidding up, bidding people up. And but your solution is interesting. Become more productive, do more with less. Do we really need the office? The things that I think we, we need to question as to what we really need and what we’re trying to achieve and how we’re trying to achieve that.
And is the, how creating more cost or less cost it’s about making smarter choices and smarter decisions. Be it in the go-to market, the marketing, the customer engagement, the customer fulfilling. There was something else you brought [00:21:00] up in your context, which was a ability to get raw materials and social raw materials.
I guess the knock-on challenge that we currently face is not just innovation. It’s a supply chain issue. So I don’t know whether they call that supply fallacious or whatever, but it’s real. And I guess they’re depending on the age of the business and the data available moving towards a much more predictive system where you can potentially mitigate future costs by coming to better agreements with suppliers and such.
The other thing is if the business already has certain capital costs whether from loans or liquidity, managing the liquidity and cashflow is looking at what the agreements are around those loans, because you don’t want them to be, shooting up. Now, if you’re a [00:22:00] business, the second scenario, if you’re a business that is recently started up or is you’re a founder that’s considering launching a startup.
I think the important questions I would ask there are number one, funding, cost of capital and how that funding is coming into play. The second question is what is the type of product or service that you intend or plan to offer? And if you look at that product or service from a customer perspective, would the customer consider that product or service discretionary spend or.
Necessity spent, say, for example you have your product is oriented to pet owners. If the pet owners love their pets and they are not going to abandon their pets, then obviously they will have to carry on feeding their pets or, whatever [00:23:00] they buy for their pets. So again, that is a question that needs to be addressed.
You need to look at it from a customer perspective, and let’s not forget that the customer is an important stakeholder of any business and understanding how inflation is broadly affecting your customer base, whether it’s B2C or B2B is critical to the longer term success of the business. So let me ask you a question.
Rolling. Do you think that the rise in interest rates will increase the cost for startups to get financing or funding? Will they. VCs now start asking for a guaranteed return on investment like they did in the old days, are we start, are we starting to look at a different environment for raising money it’s for startups?
Any thoughts on that? I was looking at a report that I received. Hold on, today’s the eighth. So I received the report two days ago and it was saying that startup investment in the U S for [00:24:00] the first quarter, this year has declined 15%. When compared to last year, what does that tell me? There are two ways I could interpret that one way is by saying, look in the last year there were a lot of exits and therefore, startups sorry, investors invested in.
Last year. And therefore there is a decline in investment this year. That’s one perspective on that piece of data. A second perspective on that piece of data would be look in the last two years, we’ve been in a pandemic working remotely. My perception in the last two years was that investors were investing much more based on gut feeling and reaction in terms of what was needed and what could deliver value.
As people start getting back to offices, investors included. I have the feeling that gut [00:25:00] investing is going to be on the decline and we’re going to get much more scientific, rigorous analysis before investing. So this due diligence is going to get a lot more rigorous and they want invest in anything and everything.
Now the third perspective is that possible. Startup investment in the us is on the decline just as if you align that with number of businesses, leaving Silicon valley, et cetera, then potentially there might be that decline. The question then becomes, where is that investment going from a geographic perspective?
Yeah, they’re all coming to sell Florida. It’s getting busy down here and our prices of everything are going up, rents, houses, everything. So if that’s going up, then it’s not just an inflationary factor. It is a supply demand factor, which is too much money chasing too few goods. It’s always supply and demand.
Isn’t it. You’re going back to economics class here. We’re in college, right? That’s what I [00:26:00] studied as well. So I cannot avoid giving the 2 cents. All right. King you’re on the stage. Do you have a story to share or some thoughts around how inflation of flat affect startup. Ah, yeah, there you go.
Sure. Thanks for for the question. Yeah. My family has a small kind of asset management business and part of that is, dealing with industrial and commercial property. And so from that perspective, the impact of inflation certainly has seen an increase in valuations and the income that strings that come in from that.
Now the flip side of that is that there’s also increased cost, right? Because there’s maintenance costs and Those charges have increased. Yes. Borrowing costs can be fixed depending on the negotiated terms of the financing, but there are still costs that aren’t [00:27:00] financed, right with traditional mortgage or other type of funding for depending on the property.
You have a property type when it comes to those maintenance costs. And then there’s also been, The challenge of wage inflation, and, oftentimes it’s not a positive thing to say and people don’t like to talk about it because it may not be the more politically correct thing to talk about.
But the fact is from a business perspective, it is a real deal of the challenges of wage inflation, particularly if you’re at a more lower margin business. And so that has caused particularly on the retail side. And also we have a little bit of a retail function as well. The fact that you had to, frankly, and this is going to sound bad, but it’s just not, it’s not bad.
It’s good for business. You’ve had to cut hours, right? For yes, quote unquote, you can advertise, we’re paying this minimum wage or this average wage, but that may also cause it to be where [00:28:00] hours are reduced in order to deal with rising wage inflation while also dealing with other challenges when you’re dealing with that component from a small business perspective.
And I’m sure from, from a much larger, but obviously we were talking more startup and smaller businesses which is the majority of companies in the, in America on the retail side too, obviously there’s the issue of sourcing right. Product sourcing and it’s forces diversification is I think Michele mentioned earlier.
Because a lot of folks, there was this push to, age, you’re trying to China, and us, I think earlier Colleen, or why are folks? So why are businesses so dependent on China? And I think it’s because of the, it’s not really even the cost anymore. I think that’s a.
A lazy way to analyze it. In my opinion, I think it’s more because of their manufacturing efficiencies. It’s not because they are the cheapest. China actually now isn’t necessarily the cheapest nation to source product from now, but most, [00:29:00] particularly if you’re, maybe just starting up, you’ve been told China.
And if you turn on the TV China, when places like the Philippines or Vietnam or other places may actually be more cost effective. And I think it’s forcing businesses now to look to diversify those supply chain issues beyond frankly, just Asia, but looking at, I took a trip to south America and, Their pricing was terrific on, certain products, particularly jewelry and things of that nature.
And frankly, the cost of transportation, shipping and things of that nature are a lot less cumbersome versus trying to arrange things from other places now, to your point as well, about what are solutions, right? Because I’ve spoken of the challenges of wage inflation and dealing with diversifying the supply chain and this matters to all businesses, but particularly small businesses, from my perspective as well, in my professional career, I’ve created [00:30:00] television shows particularly around business.
And what I have had the beautiful opportunity to do is to talk to hundreds of. Business owners and of all types. But certainly of small business owners. And what I have found from a lot of them is that they feel they’re alone. They don’t know what to do. They’ve got a great idea.
They’ve got this amazing concept and they’re ready to take over the world. And then they hit their first roadblock and it’s oh my God, what do I do? And I think what I have seen is they don’t really have a support mechanism in place. You’re are you going to have their family and folks who say, yeah, you can do it.
And I support you. But beyond that, to help with technical assistance where you deal with, for instance, trade issues, because a lot of this is a trade. And so one of the solutions I would offer is for folks to plug in with the proper support mechanisms for small businesses that can help them free resources to SBA.
You’d be shocked. What you can get free. Online in small [00:31:00] businesses, these, this apply to someone that has 500 employees or five employees or none, but you’d be shocked what you can learn from there, but an alternative as well that I really encourage folks to consider are. Particularly when it comes to really all kinds of issues, but, just tying it back to what I just mentioned here about dealing with the challenge of the supply chain and sourcing for folks who may be, for instance, in the retail side or even manufacturing, because you still have to supply that core your core product.
You need the core material to Meghan you’ve manufacturer that in product, whatever that might be, for instance, you may need metals, certain countries, or you may need different type of minerals for other type of products. If you’re in the tech space like semi-conductors, et cetera, is look at places like your local chamber of commerce, you would be shocked how much resources that local chamber of commerce can help you because [00:32:00] I’ve had relations with a lot of with the chambers.
Even if your local chamber of commerce may be here in a remote area in your state. And right now I’m speaking of just from the U S for those who may be in other parts of the world right now, speaking of the U S but a lot of other places have these as well. If you’re in a more remote place, you’d be surprised a lot of times your local chamber is a part of your state chamber and that state chamber has a lot more resources, particularly when it comes to trade and putting you in contact with the council general for Brazil or the council general for Italy.
For instance, if you’re in the clothing business and want to get your hands on the best type of material, if you’re, a person who designs or. Or, makes clothing, right? If you have a clothing line or what have you or the apparel business. So I would encourage folks that are not Outlander because I don’t want to over-talk it, but I, there’s a lot more that can be shared, but just those two options you’d be surprised [00:33:00] assist with.
And by the way, back to the SBA point, when it comes to looking for financing, that can handle some of the challenges with the rising inflation rates that the fed has already mentioned, that they’re going to do in the form of industrial and commercial real estate side of things. You’re always looking at those interest rates.
The SBA has a variety of loans. If you’ve been around maybe about 2, 3, 4, 5 years, or what have you and can show certain things that are very attractive on the financing side, that assists with capping your. You’re borrowing cost while being able to help finance the supply chain matters that you can get connected with your chambers that can put you in contact with sourcing options beyond quote unquote, China only.
And you can look at places like, I don’t know, for instance, I’ll talk to folks. I don’t know anybody in Vietnam. Exactly. That’s why you’re that, that, that business support group that I’m mentioning to you, they already had those relationships because a lot of times, if they have a [00:34:00] partnership with their state chamber, the state chambers are working with their state governors and those governors and all are doing trade missions all over the country are partnering all over the world.
So yeah, that’s so wow, now I know why they call you a king biz and I’m definitely following you by the way, because that was just phenomenal. And the lessons you shared with us here. I do know that, cause we were involved in a couple of pet related companies and we order a lot. Textiles from and reality is we buy them from China and 90% of all textiles in the United States come in from China.
So those, there just isn’t a lot of opportunities for us to buy these products made in the United States. Now, I know Michele, you did something very unique cause I’ve actually been in the car with her, where she buys these big rolls of cloth and she drops them off in Miami to two people in Miami could make these beds.
And I thought it was funny, but you’re right about the whole manufacturing [00:35:00] process being owned by China and they own the cloth market too. So it’s very hard to go around them sometimes. And and then all your other stuff, like the other one I would add for free service that we did a couple shows on this and you can listen to them on startup.club.
If you go to the website, we do all the recordings there. And this shows also goes, is we just put it into a podcast so you can catch it on your favorite podcast network as well. It’s called a serial entrepreneur club and you just search on any podcast network and that will come up. We’ve done. Show a show on incubators, accelerators and innovation centers.
A really good show there. Most of them offer free services, free programs. You can find ways to raise money and it does take a village to raise a startup. And I truly believe that. And that your advice was very wise. Michele, do you want to tell us the story about your Miami drops?
You actually call them Miami drops. I do. And Necessity, it’s the mother of invention. We all know [00:36:00] this, but gosh, I just couldn’t get anything out of China. Like I said, I refuse to pay the prices. So yeah, I just started really like talking to people, finding out like, how could I get specifically some cat beds produced here in the U S so it sent me on a journey and I’ve met a group of amazing people.
That are specifically some lady’s hair and our area where, this is what they do for a living and they completely and totally embrace the opportunity. So for me, it was a real win and I th I think it was for them to it’s also encouraged me and give me hope to try to expand beyond that and try to find other goods.
Like I was saying, that can actually be produced in the Americas. Not only does it help me in terms of the shipping costs, it’s actually much greater than that. It gives me a lot of flexibility in terms of working through designs since I’m not [00:37:00] sitting there at the factory in China. And it’s challenge at times, it also gives me flexibility in terms of inventory.
I don’t have to carry these massive inventories and I’m not paying tariffs. And then the real big upside is, like I said, there’s, a whole economy, of people that are looking for this type of work that you can feel like you’re contributing to. So it’s been a positive experience and I’m hoping that I can explain, expand on it further.
Yeah, that’s great. King, if you have any more thoughts, stay on stage, we’d like to love to hear from you any more thoughts you have, but we’ll jump down to, how do you pronounce your name and I name hi hide yet. And I see you’re a masters of economics, so we have the right person in the room there to help us explain what is inflation.
I really appreciate you. Actually I just wanted to share something with [00:38:00] you and I knew actually for answering your question about what economists are, what inflation is an economist. There is a kind of general description of that. That’s we all have read it and the books in the textbook and actually main actually literature off the economists, we call it the general increase in the prices in most of the prices.
And there are some aesthetic Nick techniques for measuring it in different indexes for showing this. And I’m just not gonna go through these things exactly. But if you want. One of the things I wanted to share with you guys was this I’m coming from Iran, a country with high rates of inflation’s chronic inflation for many years.
And in different actually years, we have some we had, or now is still a, we are actually, eh passing the time we tie [00:39:00] inflation shocks. And because I worked in financial sector for more than one year and I had to stall it economics. I have son, I have since somehow the effects of the inflation in different sectors.
And I one of the things I have seen here was that most of the companies here in Iran, I’m not sure how it would be in the United States or in the north American and European. Or if I want to be more precise in developed markets and I’m not sure this will actually be correct or not, but what is going on here is that many businesses are taking profits or actually having looked lucrative opportunities during the higher inflation rates.
When you look at the actually financial statement, you seek, there is a jump in actually the profits and EPS, and also the margins actually [00:40:00] in the companies or businesses, which we are aware in most contact with the inflation. It is one of the things that I have. In many years and actually because we have passed just the high actually rate of inflation.
And just to, in these two years in these two recent years many factories, many producers were really actually take profit from this situation. And also here in Iran, one of the problems is that we also have some regulation to control the market. And the pricing of the product is not completely upon to the actually supply and demand ruling Iran because the government will change it for controlling the inflation rates, because it’s really so hot.
So high in the government is really don’t want to have some protests and don’t want to people having this rates. It’s going to just interwind the situation, but I guess if there was no intervention. Maybe it would be better. And [00:41:00] because I guess the level of the government intervention is less in actually more developed markets.
So maybe profitable, the profits will be more there. And all other things I have seen was that all this service sector actually has been increased during these years off the H how high inflation rates. And it was one of the sectors that has been really growing in Iran. I guess the reason is that because the service sector has actually less costs as ruined, just indicate about the cost of the cost of the products or something like this.
And this is really important to be optimum. And individual methods and everything during the high inflation periods, bots, the service sector, especially the ones who are actually involved with less things in [00:42:00] comparison with the product is actually sector. For instance, in indirectly cost of the goods, assault is services are less in comparison with that part.
This sector has been really grow in Iran. And I guess the reason is the profitability of the these sector, because they were actually higher profits in service sector during the high inflation rates. And there are lots of medians actually in the markets as a result of the inflation. And me, if I wanted to have some idea for during an inflationary period, In some part of the world, I will think about the service sectors, a weight actual with actual less costs and not involving lots of costs because it’s really important.
But because the services we’ll have actually will go, I will have increasing their race Palm today, inflation [00:43:00] because they are paying the wages and everything is going to grow. As we just, as I just told that at the actual, first of my speaking about the definition of the inflation, everything we’ll have it increase in the price.
So the services will also increase and the wages are a good, a reason for that. But the costs maybe have less Increase in comparison with productions sex work, and it can be a good idea to go. And if a person has gone to thinking about starting a business in, and he, or she is just thinking about which sector with the GI bill, be a good choice during the inflation, I guess the service sector is one of the things that’s really worth thinking about.
Wow, it’s really, fascinating to hear, outside of the us, the impacts are the same. So thank you for sharing that. . We are coming towards the end of our [00:44:00] shell. So I want to just remind everyone that we do have an email list for startup club. So we encourage you to join the email list so that you can stay of informed of any special events or guest speakers that we’ve had.
We’ve had some amazing speakers already. The share from, Jeffrey Moore who wrote crossing the chasm is, which is considered one of the top five business books ever written. We’ve also had Procter and gamble on doing our competition for Living healthy types of solutions. We’ve also had the privilege of having recently from one of our other leaders on startup club brought on the founder of Reebok.
So if you want to keep informed about these really cool events, please just go to www.startup.club and join our email list. So without further [00:45:00] ado, I see George, Mr. Four 20 is on the stage or very, I know you’re actually been doing a startup. That’s taken, a lot of capital a lot of time.
It’s very illegally intensive. George is inflation influence. You influencing you in a bad or a good way. And what are you doing about it? We’d love to hear. Yeah. Thank you so much yet. White with the inflation goals it’s not affecting us. Like other companies you could say because we’re in the space where everything is regulated, you could say.
The pricing the testing, the cannabis of the pricing structure is still the same across the board. And for us, I don’t think we feel the effects of the inflation. I think the people that will feel the effect of the inflation will be the end user, because they’re going to have to pay more for that cannabis for example.
Yeah it also to Michele, it took us to, almost four years to get this [00:46:00] off the ground. We had our challenges and stuff, but like I said, the pandemic, everything set us back and we just continue to press forward. But I think. During these times of inflation, we got to learn how to adjust, not complain about it, but, we have to adjust, our lives and in every aspect, financially, decisions that we have to make for our company.
And also too, I think even people that want to do new startups, that you really get to look closely and what you’re going to S what startup. You’re going to invest in, and you want to make sure that startup thrives during the good times and the bad times, right? During the good economy and the bad economy that it continues going.
And like for example, if you’re in, for example in Mexico and you have a tortilla factory, that tortilla factory is going to work 24 7. It’s never going to stop. It’s going to keep making tortillas no matter what happens then. Yeah. Are there other tiers going to go up?
Absolutely. Because that’s some, that’s a commodity that people are going to use and they’re going to, they’re going to use to eat what they right. And the cannabis is different. Cause nobody we’re [00:47:00] just testing. We’re just in the middle ground. We’re just making sure that the growers are staying compliant to the regulations of the state of California.
For us right now, Michele, we don’t feel the inflation, the company George, if you had to buy all that testing equipment now, Are the costs much higher than cause you got them a couple of years ago. I believe. We just got the equipment around probably around eight, nine months ago, I think right before the inflation started taking off.
So you’re probably right. Maybe the equipment might be higher because there’s a cost to everything. Everything’s going to go high. It goes all the way down to the nut and bolt, you could say. We got the equipment and like I said it, it wasn’t cheap. The thing, what I’m trying to say through this whole situation is, probably any other startup that comes in and tries to do something like this.
Yeah. They’re going to pay more money. Absolutely. I agree. 100% for us. We got in at the last second, you can say before everything went up. So I think we’re in good shape. Yeah. And the price of weed, does it actually just rise with inflation or is [00:48:00] it actually dropping in price? I’m just curious. Oh I think it’s been a ride.
I think honestly, it’s going to rise not on our part, not on the grower’s part, but I think on the distribution side of beings, I think, more, they’re paying more gas to deliver the stuff right there at, to pay employees or so it’s gonna, I think the kids are going to pull up the price is going to blow up on the cannabis side, but not on our part for testing, but on the distribution side, as these guys tend to take the cannabis to two different to distribute the different defensive from state of California.
But I believe it’s going to go up. Can I ask a question? Yeah, go ahead. Rolling. You’re the last stop. Your last step. We’ll close it at the hour. So I just had a question for George. Are you seeing rising demand for cannabis? Yes. Yes. Because everybody has to deal with the inflation, the stress of inflation.
That’s how they deal with it. What I was thinking, Colin, do you have a great [00:49:00] point because, remember when the pandemic hit cannabis sales went up the roof cause people, were stressed out. There was more alcohol sales or, there was a lot of crazy things going on during the pandemic, but even during the inflation part, I think people right now are real stressed out and they’re looking for other alternatives to relax.
And cannabis is where it’s at right now. And but yeah, I believe that’s going to happen. Rolling.
All right. That’s great. That’s a great way to end the show. Next week we’re going to the metaverse. Okay. So we have one of the The leaders leading technology companies. We have the president, she came on as she spoke here about incubators accelerators. Actually, she was on, on that show because they offered a a, an incubator inside the metaverse and the KT government had hired them to to set this up.
So we, we learned so much from that show that we decided to bring her back and we’re talking with her next week about how [00:50:00] startups can benefit from the metaverse and what this, other opportunities in the metaverse, where we can launch businesses, is there a, I know in her case they launched an incubator, which I find interesting.
I find it fascinating. And you may not be in the business of the metaverse, but you may be in another business. We, Michele and I are good friends with the gentleman. Who’s founded fat village, Fort Lauderdale arts and technology village, and they’re building, they’re doing a half billion dollar.
Construction project in that neighborhood, but they also are interested in doing a metaverse version of their neighborhood as well. So what kind of applications could startups use? That’s all next week two, o’clock Eastern on the serial entrepreneur club hour. Thank you for listening. And Karega Roland king hand.
I, George always, really appreciated it and always love it when you come on and share your thoughts. Thanks again. We’ll see you next week. Be well.[00:51:00]