How Tariffs and Inflation Shape Small Business Strategy

Are Tariffs Really Just Another Tax on Your Business?

Randi Lynn Johnson: Okay, so we've set up our year. Now, Robin, I know that you had a question. By the time this episode hits, it might be this week — we might be instating our new old president.

Robin Pasley: New old president, yes, and we've already had some questions coming our way about tariffs, because we have some products that come over the water — which means they're made in China, mostly. We have a few vendors like that. Most of our vendors are in Canada, and then the rest of them are here in America. But what we know is even the ones here in America, some of their supplies and components are coming over the water. So tariffs are going to hit us no matter where your products are made — or at least they're going to be considered. I want to know, because there's already been a little alarm going off — I hear people freaking out that this is going to be felt like a tax. What do you think about that?

Brian Werner: It could be perceived as a tax, but fortunately we still live in a free country and all companies will have the choice on whether they continue to source from those countries that have a tariff imposed against them. Companies may have to get creative — seek out new supply sources from countries not being impacted by the tariff. So I think you're going to see companies get creative first, and then potentially look for other sources so their margins are not impacted negatively.

Robin Pasley: Like TFL — thermal foil laminates — many of them are made in China, but there are some made in Italy. That's a component used to build furniture, and they can just source, like you're saying, from Italy instead of China.

Randi Lynn Johnson: I volunteer.

Brian Werner: There may be a lot of business travel that results from some of these tariffs, with companies and people attempting to establish new relationships in other parts of the world.

How Should Business Owners Handle Pricing Pressure From Tariffs?

Robin Pasley: I do remember — because what I would say to some of that fear is that at least we're dealing with a president who has done something like this before. He did impose tariffs in his first presidency, and I remember seeing the same kind of concern. I do remember on some of my invoices seeing it come in as a line item, and we'd have to decide if we were going to pass that along to our clients or absorb it. You've talked about that a little — about margins and trying to decide what to do.

Brian Werner: Any potential issue — or call it a problem — that we have zero control over, there's always an opportunity. There's always potential solutions. However, let's say we're in a place where we have great vendor relationships and those tariffs do impact our suppliers and I simply can't find anybody else. At that juncture, a company may be stuck with a tough decision: I'm now having to pay 10% or 20% higher on goods I was sourcing a couple of months ago at a lower price. At that point, a company is probably going to be forced to pass that price increase along to their customers. And of course, you're going to have some customers that are probably not going to be happy. But that customer might be in the same boat — they may have had to pay higher prices because they source from the same country. So there's going to be a lot of companies and people in similar situations.

Randi Lynn Johnson: That's a good way to see it. It will require pivoting, but what I'm hearing is we shouldn't panic.

Brian Werner: Life is too short to panic.

What Did Inflation Reveal About Small Business Margins?

Randi Lynn Johnson: I agree. All right — so we've got tariffs, but it's also sort of like inflation, right? That was a big deal this past year. It went up — I felt it, I think everybody felt it — but we're still standing. Brian, I want to hear from you as a CPA, because you probably saw it in greater measure, talking with a lot of people. What was that like?

Brian Werner: We did, because we actually sit down with our companies quarterly, and we could see when inflation started to really pick up. We could see the impact on companies' bottom lines — on their profit margins. Because we meet with our companies so frequently, we picked up on that right away. So we worked with a lot of our companies and said, hey, your input prices are going up and you have zero control over that. You have to increase your pricing to your customers. Because if you don't, your margins are going to start to come down. And all of a sudden you're going to be a year in and say, my revenues are the same, I worked just as hard, but I made 20% less than I made last year — and that's usually not a great feeling for anybody, especially as a business owner.

Brian Werner: Big corporations do this all the time. Anytime their input prices increase — insurance, overhead, rent, materials — those go up every single year. For a long time, 2% was a very small blip on the radar, almost unnoticeable. But once we started ramping up into the 6%, 8%, maybe even 10% range, it has an impact — because it's also compounding. People had hope that we would go back down at some point. That's probably not going to happen. So at that point, a company has to adapt. If they want to survive, they have to pass that along to their customers. And in a B2B environment, that business is going through the same exact thing.

Why Community and Mindset Matter More Than You Think in Business

Robin Pasley: I like your positive approach to all of this. Your note was: we're still here, we're all still doing business together. We're getting pinched here and there, but we're all still in it together. That's a really positive way to see things we can't control. Like in our work with commercial interior design clients, the mindset we bring to a project — staying focused on what we can shape — makes a big difference in outcomes. So why live our lives in a ball of knots?

Brian Werner: Focusing energy on things we can't control, to me, is just not productive.

Randi Lynn Johnson: Yeah.

Brian Werner: And it's not good for your health either. They say stress could be the silent killer.

Robin Pasley: It's not productive and it's not good for your health.

Randi Lynn Johnson: This is a great conversation to have as we start the year. We know we're going to handle the things we can control — what's in front of us — and we're going to keep stepping forward. We have great people. Stay positive. Come positive.

Brian Werner: You need to boost your positivity.

Randi Lynn Johnson: Come find me and Robin. And if you need help with all your financial needs and taxes — because it literally makes my eyes cross — I thank God every day that my husband just handles the budget.

Brian Werner: My wife's the same. She's like, sometimes I'm so thankful I married an accountant.

Randi Lynn Johnson: Well, if you're not married to an accountant — or even if you are — go talk to Brian and his team. They're going to help you out. The link to contact him is in the show notes. We really appreciate you coming down, chatting with us, reassuring our listeners, and being such a great member of this Colorado Springs community.

Brian Werner: Thank you for having me, and thank you for being such a wonderful community member. It takes a village — it takes a community — and we all have to look out for each other and support each other, however that looks.

Robin Pasley: I'm glad we're all in it together.