The Small Business Safari
Have you ever sat there and wondered "What am I doing here stuck in the concrete zoo of the corporate world?" Are you itching to get out? Chris Lalomia and his co-host Alan Wyatt traverse the jungle of entrepreneurship. Together they share their stories and help you explore the wild world of SCALING your business. With many years of owning their own small businesses, they love to give insight to the aspiring entrepreneur. So, are you ready to make the jump?
The Small Business Safari
Inflation 2025: Navigating Tariffs and Rising Costs
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What happens when your $3.50 breakfast sandwich suddenly costs $12.50? When your skilled workers demand $30/hour instead of $18? When your commercial lease jumps 50%? Welcome to the economic reality of 2025 – a landscape transformed by persistent inflation, potential tariffs, and permanently reset price expectations.
This candid, unfiltered conversation dives deep into the practical challenges small business owners face as they navigate today's economic pressures. We explore the "Overton window" concept – how yesterday's outrageous prices become today's reluctant acceptance – and what this means for your pricing strategy. Using real-world examples from construction materials to commercial real estate, we illustrate how inflation has permanently altered business costs across industries.
Most valuably, we share actionable strategies for protecting your margins without alienating customers. You'll learn why 30-day estimate validity periods have evolved from sales tactics to financial necessities, how technology adoption can create operational efficiencies, and why employees often resist price increases more strongly than customers do. We also discuss the looming influence of potential tariffs – and why they're already impacting pricing decisions regardless of whether they're ultimately implemented.
Throughout this discussion, we maintain a strictly practical perspective focused on business survival rather than political posturing. The insights shared apply across industries and business sizes, making this essential listening for anyone navigating the complex economic terrain of 2025.
Ready to strengthen your business against inflationary pressures? Listen now to gain concrete strategies for maintaining profitability while continuing to deliver exceptional value in today's challenging economic landscape.
Thanks to our sponsor Smart Hire Solutions LLC!
Pricing in Uncertain Times
Speaker 1And so you have to watch it. So what do we do? Well, we make sure when we're pricing things, we're locking in, we're actually holding firm on our 30-day estimates. Now is that if you come back to me on day 35, I'm going to have to relook at everything because I don't know? Yeah, you told me that when you quoted my deck.
Speaker 2I know, and I think that's fair, because people hold onto those estimates for six months or a year and they expect you to.
Speaker 1I had a guy here we are laying this down in March of 2025. I had a guy. I looked at his deck starting in September of last year and he asked me if I could honor that September pricing. And I'm like I have no idea. I said, if you really want to do this, you just have to understand. I'm fair with you. There's a reason you came back to me is that you know who I am. You know who I'm about, but I'm pretty sure I'm going to have to charge you more because the price has gone up.
Speaker 2So it's a great nugget for people who's you know, 30 days on your estimate.
Speaker 1Welcome to the Small Business Safari where I help guide you to avoid those traps, pitfalls and dangers that lurk when navigating the wild world of small business ownership. I'll share those gold nuggets of information and invite guests to help accelerate your ascent to that mountaintop of success. It's a jungle out there and I guests to help accelerate your ascent to that mountaintop of success. It's a jungle out there and I want to help you traverse through the levels of owning your own business that can get you bogged down and distract you from hitting your own personal and professional goals. So strap in adventure team and let's take a ride through the safari and get you to the mountaintop man. I love that music and we have got to rock this. We're going to do this a little bit different. Al and I are going to be in studio together by ourselves.
Speaker 2Don't sound so sad about it. I mean, we have a good time.
Speaker 1We do always, of course. Well, cheers, We'll drink to that.
Speaker 1So we're going to talk what this tariff thing and what the 2025 economy thing looks like and what's going on in my biz. So as we do that, I'm going to give you kind of my thoughts on this, and I've been on a couple of other really cool podcasts talking about what other people are thinking, and we're listening to what's going on in the world and stuff. So let's rock into it. Alan says he's got a lot of questions. I started talking, he goes can you just save that for the podcast? I'm like oh, all right, don't leave it in the room, let's get it going. Come on everybody, let's go figure out what the hell is going to happen to us in 2025. We don't have the answers.
Speaker 2No, so we can drink our way through it, but this conversation started because, okay, you claim to be a southerner. Now, right, you've got the bad accent and everything.
Speaker 1Hell yeah, I got that bad accent down here in the.
Speaker 2South. Tell our listeners outside of the South what is on a breakfast sandwich.
Speaker 1What do we put on a breakfast sandwich in the South?
Speaker 2Yeah, just, you go to some dump and you get a breakfast sandwich. What's on it?
Speaker 1Well, you got to have a biscuit, you got to have cheese. You got to have a biscuit, you got to have some cheese. American cheese, by the way it's always American cheese, and you know what? The processed American cheese is still the best, and get it plastic. Oh, that's got to have bacon. You got to have some grease, man, you got to have some protein, as we like to say.
Speaker 2All right, so how much should that breakfast sandwich cost?
Speaker 1Oh me.
The Inflation Reality Check
Speaker 2Well, what number comes to your mind immediately? Three and a half. Yeah, so I'm up to five. I was talking to my business partner Chad this morning and he went to breakfast with somebody $12.50. Oh no, no, he wasn't even in like a Ritz-Carlton restaurant or something $12.50 for a breakfast sandwich.
Speaker 1Well, I used to joke back before the inflation really started picking up is that you go to the Ritz-Carlton. That's a great $20 hamburger. But what makes that $20 hamburger this is all before the big boom of all those things a $20 hamburger. Now I found out, the Ritz-Carlton hamburger is $32 to $37.
Speaker 2Yeah, I mean right now, if I have lunch including tip under $20, I'm like, oh, I did a good job and so we've just gone through I won't say an unprecedented inflationary time, because you and I are old enough to have gone through a previous one. But for most people listening they haven't seen this kind of inflation and now the inflation rate is back down to almost a normal level. But the prices didn't go back to where they originally were and it's kind of that Overton window thing. Do you know about that?
Speaker 1No, what's the Overton window? We're about to learn everybody.
Speaker 2The Overton window is used mostly for politics. It's kind of like what is an acceptable topic of conversation and I'm you know you think about what is normal discourse in politics today. We may not have talked about 20 years ago because it would have been crazy, and now it's normal and you can kind of apply that to to gas prices, anything else. So you know, gas prices for the longest time around here were two bucks a gallon, and if it went up to 250, you were horrified. But then when it went up to four dollars, everybody was freaking out and then it dropped to three and you were happy, right. So it was kind of the new normal. We talk about it as the new normal. So I'm thinking about that. When it comes to your business, my business, I'm in commercial real estate but you have something that's immediately impacted by the cost of materials, the cost of labor, and we've had a number of people on the show recently who just say, well, just raise your rates. You should just raise your rates.
Speaker 1Yeah, and it's not that easy just to raise your rates, raise your rates. So let's talk about this inflation and what has happened. My guys when I first started back in 2008,. If they could make 18 bucks an hour, they were happy, and a helper who can make 12 bucks an hour, they'd be happy. Those are the facts. I was in industry average. It was close to everything. Facts I was in industry average. It was close to everything. Now my guys expect 30 an hour, um, and my helpers expect 20 an hour, with no tools and no transportation. So it's definitely gone up. You know labor costs and you know what I don't begrudge them. When you think about this guys, you know they have to go buy food and all the food prices have gone up. We just joked about the biscuit prices and then, well, house 50 cent an egg surcharge.
Speaker 2I mean, my God, the sky is falling.
Speaker 1Right. So eggs, yeah Well, that's a great example of what happened. So what's happened? They had to kill 10 million chickens and so the eggs have gone scarce and with scarcity, it's a pure example of supply and demand. When you have 10 million less chickens, that's a lot of less eggs, and now everybody wants eggs, or the normal amount of people want eggs, and now they're being told you can't get them.
Speaker 2You know, I've seen people hoard eggs at the freaking grocery store. Well, suck on those eggs.
Speaker 1I saw the same thing and I laughed because I went to Costco just to get and I was there. I said I'm gonna get some eggs. They're gone. I'm like, oh my God, this is becoming the toilet paper of COVID, these toilet paper you can keep in your attic, so, but it's again. So the consumer mentality. Clearly, we're lemmings, Lemmings.
Speaker 2We are.
Speaker 1We're totally lemmings. Yeah, so, but I guilty. When it went up to three bucks a gallon, I told my brother up in Michigan. I said well, I don't know if we're going to come home for Christmas this year because gas is so much. He said, so 50 cents more a gallon is stopping you from coming to Michigan. He goes maybe you need to get a new job, buddy. I was like, oh, that's a good point.
Speaker 1So, but I had that mentality, I followed it and people are doing the same thing. You know, I used to rip on boomers who used to, back in the day, do it themselves and would go when Home Depot wasn't even a Home Depot. They would go to Ace and get their stuff and take the five or six trips and they would do everything at their house themselves and they'll sit there and they'll tell you you know, I used to be able to do this for $18. I'm like, no, you didn't really. You spent all weekend and you didn't really just spend $18 because you forgot the four tools you had to buy to be able to do this. So you know, I think everybody has a perception of where the prices ought to be, and I'm guilty of this. So how do you handle the inflationary pressures? Is hard and I will tell you Are your margins the same as they were two years ago.
Speaker 1So my margins actually improved in 24 over 23 because we did react to it and we did raise our rates. I had to. So I have raised my rates and did you just?
Speaker 2arbitrarily go X percent, or did you actually think about it?
Speaker 1Oh, I had to think about it a lot because I wanted to figure out what would somebody and we've had John Ray on and John you know great guests talking about the value, generosity mindset and how to price yourself. You prove the value, you can get the price, and so I think we prove the value now of what we do. We talked about that a lot over the podcast is that when you first start, are you really a value play? I mean, do you really know what you're doing, especially as a handyman working all around the house? But now I think, in our world for what we're doing, yes, so I raised my rates. My profit margins went up.
Labor Costs and Material Hikes
Speaker 1However, the things that also happened is materials did start to come down Because remember, in 2020, not so long ago, five years ago when COVID hit, all of our material prices went way up because of scarcity and again, hoarding and demand and everything else going on. So the example I'll use that makes, I think, the most sense to me is if you go get a 16-foot pressure-treated deck board from a big box store, when I first started in 08, it was $8 for 16 feet. So that's do the math 50 cents a foot. Go to 2012, 13, 14, right in there it got up to just around 80 cents 90 cents a foot it was. You could buy a board. When COVID hit, a 16-foot board, which I told you started at eight, got up to 12, was $13, went up to $32. Oh good, lord Right, so has it come back? It has it came back, though, to $16 for a 16-foot, and you were happy about that.
Speaker 2I.
Speaker 1So it moved. It did yeah, yeah, so I'm excuse me, I'm there. So now the other thing we're living through is you didn't bring it up, but I will Donald Trump's now in office and he is threatening tariffs. So what did I do? Well, I did what I call, and I've heard that told to me before the three phases of truth. First, I vehemently denied it. No, not gonna tear if are not going to raise my rates, chris, or a tariff's going to hit your material.
Speaker 1Material comes from overseas uh, so again, of course you're treated boards. You think they all come from the south, but Canadian lumber mills also provide materials for us as well.
Speaker 2We used to be friends with Canada, so three three phases of truth.
Speaker 1I messed it up first. You. You ignore it. No, not going to happen. You know Trump's just being Trump, he's just bullying guys doing his own thing. It's negotiating time, yeah.
Speaker 1And then I had somebody say no, these tariffs are going to raise your rates. And you know you're being all conservative, I know you're a Trumper. It got all political. I'm like whoa, whoa, whoa, dude, this is not political.
Speaker 1I can give two craps, when it comes to my business, about who's in office when I'm working. I said, because I got business to do and I've been through all the administrations and I've been able to survive and thrive through all of them, so I don't care when it comes to my business. What I will tell you, though, is that I started, so I vehemently denied it, man. I got in an argument with the guy, and then I've now had to accept it as intuitively obvious yes, tariffs are going to raise the rates. Now hang on.
Speaker 1Are the tariffs actually going to be enacted? I don't know. Are they going to be pulled back? I don't know. Do I think they'll ever go in? Personally, no, but do I think people are going to raise the rates because of the threat of tariffs? Yep. So guess what? It's intuitively obvious. And, yeah, we're going to go through more of a material hike and so I know things will again back to your. What was your fancy term Overdue? Yes, thank you. So good, going back to it, I think we're going to see it up and then we're going to see it go back down and I I do think eventually things will get figured out. Um, hopefully, a lot of the um, the the you, the um, world discord will go away. Uh, hopefully very shortly, and we'll start to get back into more normal. Because, believe it or not, before the ukrainian war people didn't know this, but a lot of our cabinets actually came from ukraine. Yeah, the birch plywood, we would ship it over there. They would make it and bring it and send it back to us.
Speaker 2It's still strong. That's more cost effective, but your labor rates are never coming down.
Speaker 1My labor rates will not be coming down. Even if I went into a major recession, I don't know if guys will be willing to work for $12 and $18 an hour anymore.
Speaker 2I mean, that would be again you can't make that assumption, so that's baked in Yep and then, with the Overton window, change your cost of goods you know.
Speaker 1So what can?
The Impact of Commercial Lease Increases
Speaker 2you do. You can cut costs, but nobody ever cuts their way to success. You can raise your rates or you can scale up and just try to get some efficiency.
Speaker 1So for me, it's the scale up and efficiency and figuring out how to raise rates mildly. Another great example the rent that I pay for my commercial lease and I know you're in it. You're in that world. I'm in a five thousand square foot light industrial space. Well, I signed up in 2019. Well, in 2024, my lease came due. I am now paying exactly 50 percent more than I used to pay. And you're like, of course you are Chris, because you guys all raised your damn rates.
Speaker 2Alan Well, no, and that goes back to the interest rates too. So the people that own that building, their loan matures and the bank goes hey, whatever interest rate you had, we have to test it against what the new rates are, and if it doesn't, it could be that they call the loan. It could be that they have enough coverage to where they go ahead and extend the loan, or you have to come up with some cash. And so what is happening? We've seen a lot of turnover in buildings. Or we've just seen hey, your rates are going up 50% for your lease rates.
Speaker 1That's across the board. Yeah, and so it's happened. I'm not the only one, and Alan just explained why it happened. But here it is I now have. So, chris, reduce your costs. Well, my cost just went up. You just heard my rent and you're like, I actually actively look to move and reduce my size and my footprint and I couldn't find anything because the cost of moving would have offset the cost of the increase, right, and I couldn't find low enough on the uh, no enough square foot price. So that's again back to the cutting costs.
Speaker 2I mean there's lots of ways you can do it. None of them are pleasant, you know. There's head count, there's squeezing your vendors, there's finding new vendors.
Speaker 1I mean there's well you, you hit on one thing. You said well, how can you use technology to help you with this? Did I say, that. You did Well, you said it before we got in.
Speaker 2I was going to say, wow, you gave me my mind.
Speaker 1No, you said it before we got on the podcast. You're right, you asked me that and it stuck with me. How can I use technology right now? I'll give you an example All of our suppliers. So to back up in COVID, I Back up In COVID. I used to get a supplier increased notification annually, annually. After COVID it went monthly.
Speaker 2Really.
Speaker 1They were changing their pricing monthly and if you ever shop at Depot which I do a lot they did a really good job of updating their app so you can see exactly who has something in stock and how much it's going to cost. And they were updating that thing, allegedly, I'd heard, daily. So I don't know about that. I can't prove that, so you can take that to the bank. Home Depot did it daily. No, but they updated it up and down, up and down, up and down, and so you have to watch it. So what do we do? Well, we make sure when we're pricing things, we're locking in, we're actually holding firm on our 30-day estimates. Now is that if you come back to me on day 35, I'm going to have to relook at everything because I don't know? Yeah, you told me that when you quoted my deck.
Using Technology to Adapt
Speaker 2I know, and I think that's fair, because people hold onto those estimates for six months or a year and they expect you to honor it.
Speaker 1I just had a guy. Here we are, you know, laying this down in March of 2025 at a guy. I looked at his deck, starting in September of last year, and he asked me if I could honor that September pricing. And I'm like I have no idea. I said, if you really want to do this, you just have to understand. I'm fair with you. There's a reason you came back to me is that you know who I am. You know who I'm about, but I'm pretty sure I'm going to have to charge you more because the price has gone up.
Speaker 2So it's a great nugget for people who you know. 30 days on your estimate, right.
Speaker 1Put that 30 day out there. It used to be for a nudge and a sale, but now it's truly for price conditioning and price holding. Back to your other point how can I use AI in my world to help me with technology? You know I've got. I had four ladies in the office answering the phones. I actually now am down to three. We had some attrition but we found some synergy with our phone answering system.
Speaker 2Did she do code for whacking?
Speaker 1No, she quit. Oh, okay, yeah, and that was a good thing, because we also found out she wasn't doing shit. Well, it's that she was on her phone.
Speaker 2I'm talking about efficiency. Three people instead of four, yeah.
Speaker 1Now, it's not because I have AI people answering the phones. It's that I've had people using AI in my office to help answer questions and we've actually built a database in our own database. Big word, but information sharing on what we do and what we can't do and how much. Pricing is typically based on pictures, so when we see those pictures they'll be able to price them better out of the office.
Speaker 2So how does that work? Sorry, I mean, somebody sends an, so when we see those pictures. They'll be able to price them better out of the office. How does that work, Sorry, I mean somebody sends an email or is this a phone call?
Speaker 1So you call the office. You're definitely still talking to a human being when you talk to us and we're going to say we need pictures because I don't know what your house looks like. You know what your house looks like, I don't. I need to see what I'm going into. So send me some pictures and they actually, with one push of a button now, send a text message while they're on the phone with the customer, sends a text message to their cell phone saying here's where I want you to send the pictures back to. We get the pictures back while they're there. Then they can go. Look at what we charge typically for items all in our database that we built. Again, big word. And that's just the first step to how we're using technology to help us price quicker and have them answer the questions on the phone and convert more sales. And so at that point, there?
Speaker 2well, actually, didn't you say you're actually closing deals over the phone now?
Speaker 1Oh yeah, a lot more, way more than I have. I don't have a percentage on it yet because we switched software last year and I lost some of my data. But what I do now I have is better tracking and I will tell you. I know where all the calls are coming from, I know how long they're on the phones, I know what was the outcome of the call. So that has been really helpful and given me a lot of insight into my business. And another reason, I think, when I say we went from four to three, probably not technology, but really it was technology because I was able to see that and we figured out you didn't feel like you needed to replace him.
Speaker 2No.
Speaker 1I don't think we will unless we blow up. I think this year is going to be nice steady growth and I think we'll be able to keep up with it.
Speaker 2So it had to have been a scary thing to trust somebody quoting over the phone, because you know how it goes. You get in there and it's a completely different animal.
Speaker 1So we've trained them on how to do that, because with pictures it's hard and we do the. It depends. A lot of home service companies have gone to flat rate pricing and so if you go to HVAC, electric or plumbing, it's one call. You know, hey, I need to get my 40 gallon hot water heater replaced, and they don't say hot water, it says water heater and that on. But they all have a flat rate for it. First story, don't have to go up a second story. It doesn't need an expansion take it's going to be this much and here in Atlanta the big plumbing companies are all about the same price.
Speaker 2And so they know they've added a little bit of fat to kind of cover the incident. They cover the hiccups with that.
Speaker 1That's correct, Right. So we've been more and more likely to do that. Plus, in the home services world. I was on a podcast and I talked about this more, More and more and more people don't want to mess with this. There is a reason Home Depot and Lowe's stock did suffer a little bit last year because the DIY market is starting to shrink again. Because they're like do I really want to go out and buy those four tools and spend all weekend doing this, or do I want to spend time with my five and seven year olds? And that's what people are seeing and that's true. So people, peace of mind, know who they got. They got a great company on the hook and they're doing the work for them, are willing to spend that money. So that's been awesome as well.
Speaker 2Now did you have to work with your sales team to get comfortable? I mean, I'm assuming you made some pretty significant price hikes.
Overcoming Employee Rate Resistance
Speaker 1I have. When I first started I went back and looked at this. I mean in any industry.
Speaker 2It's funny. It's really hard for your employees, Harder for your employees to accept the rate hikes than the customers, because the customers don't know different much.
Speaker 1I've had a lot of handymen come and go when we first did this. Our culture is pretty strong now. They'll know within a month whether or not this is a good place for them to work now, which is why my average tenure is up to seven years. We just celebrated anniversaries this morning 13, 12, 11, 9, and 7.
Speaker 2That's fantastic. Yeah, that's been great.
Speaker 1But in the beginning, when we started raising rates, I'll give you an example we have had the half-day and full-day rates, half-day and full-day handyman going now for 13 of my 16 years, pretty consistently. When I first started my half-day rate was 320. My full-day rate was 640. So you know it's easy, right? So got it Even for me, Right? And so then I moved them up to 400 and 700. And I had guys going no, I can't charge that, I can't do that, I'm gouging people. We're not gouging people, we're doing a great service for them.
Speaker 1Today our rates are 890 for a full day and 490 for a half day, or 470. Yeah.90 for a full day and $4.90 for a half day, or $4.70. Yeah, $4.90 for a half day, $8.90 for a full day. Why? Because we can knock out so many different things that people ask for. I have to pay more for my guys to do the job. But we continually train and again back to John Ray provide the value that people love and people now are thrilled when we walk out of there and they're just absolutely just tickled silly in writing us a $1,200 check because this guy knocked it out, and then they actually provide him a review. I've gotten more reviews per day in the last six months than I've gotten since I started. Does the sticker shock hit your employees more than it hit the customer? A hundred percent.
Speaker 1I tell my guys don't write the check, let the customer write the check. You have no idea where they're coming from, and it's not that they're all full of money. Where they're coming from is I would rather just pay you to make this go away. Please just make it go away, so I don't ever have to look at it again.
Speaker 2Well, and I think with anything there's sort of that number in their head, like I asked you about the breakfast sandwich, what do you think it should be? And then all of a sudden you get this number that's a lot higher. Now, not $12.50, but if you said $3.50, but if you saw $6, you would have just kind of gone. I guess that's what it is now.
Speaker 1Yeah, I would have paid $6. Would I pay $12.50? I'd be like no, because I'm thinking to myself I can go next door to somewhere and I can get a full meal, which you can't, but I know, but that's what you still think. I still think that because one of the biggest enemies of my company is me and my mentality. When I'm pricing things, I'm like, ah, it can't be that much. Oh yeah, towel guys are charging that much. I'm like, well, that's crap.
Speaker 2How quickly are you aware of whether or not your margins are still good or not?
Speaker 1Monthly, monthly, monthly 30 days in a row 30 days, but I'm always looking backwards, never forwards, and after 30 days I know something's happened, but usually that means 90 days of this has been happening. I still say this For calls coming in, I use three weeks. If I have three weeks where my calls have declined, I have a trend. If three weeks where my calls are going up, I know we're coming back into spring and things are rocking, or if they're not coming up like I thought, I'm like oh, what's going on? So that's one for my pricing. It takes about three months. So I say monthly, we look at it, but it takes me three months to make a reaction to it, because it's hard to react and all the different things we do. Yeah, you got a lot of parts. Yeah, so I again. I just kept on telling a guy locally he's got 250 trucks on the road. He's just, you know, got people everywhere. I said I wish I just did heating and air.
Speaker 2I really do we established that on a previous podcast yes, because what were you thinking?
Speaker 1because he knows exactly where his prices are going and they're coming from one or two vendors. So that's it. I know we're going to wrap this up. You guys have listened to a little bit of what to do, so what are your takeaways? You still listen to this thing.
Final Thoughts on Business Adaptation
Speaker 1Yeah, inflation is here. The tariffs are going to impact you, whether they ever happen or not. They're going to impact you. Don't get political. I don't give a shit about that. You need to be able to react to it, because somebody's going to raise rates on you and you're not going to see it. Get in tune with somebody who's supplying you parts, because they're going to raise a rate, and sometimes they're really good at telling you and sometimes they're kind of afraid to tell you. Right, and to Alan's point, do you want to raise your rates? Yeah, you might want to look at it. Find a way, uh, but you also gotta find a way to work a little more lean to me and use technology to your advantage, however you can in your business.
Speaker 1All right, man, we gotta keep going. We're gonna rock and roll. Man, I can't wait to talk to you guys all next week, because we got some great episodes coming up. We've got some dynamite guests and we're gonna go make this thing happen. Keep going up that mountain, because you know what, going up, sometimes you got to go down to go up. When you scale a mountain, sometimes it feels like it sucks and you know what, if you guys listened to a couple of weeks or episodes ago, I was in a funk, but I'm back out of it, man, we're in rock and roll. So let's go make it happen 2025,. Look out, we're about to kick your ass. Cheers everybody.
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