EP 104: How to Combat Tariffs Without Killing Your Profits

In this episode of the Enlightened Entrepreneur, I share my answer a timely question from my recent Financial Freedom Bootcamp: how can small business owners stay competitive amidst tariff changes, without resorting to drastic price cuts? 

Listen in to learn what tariffs really are, how they impact your pricing & cost structure and what steps to take to protect your profits.

💡 What You’ll Learn

• What a tariff is (and why thinking of it like a “duty” helps)
• Why competing solely on price can harm your business
• How to review your cost structure and pricing strategy effectively
• Ways to enhance perceived value instead of discounting
• Smart strategies to stay competitive without sacrificing profit margins

🔗 Resources & Links

• If your pricing could use a review, be sure to grab my easy to use Product & Services Pricing Calculator today!

Transcript

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Leandra 0:02

A few times a year, my team and I host our Financial Freedom Bootcamp, which is a virtual training that takes place for about an hour a day over the course of three days. And in this bootcamp, we are connecting with small business owners and aspiring entrepreneurs to help them really make money management approachable and actionable. Really taking out a lot of the jargon and thinking about how you can decode your numbers, how you know what data points you should be looking at in your business, and how you can use that information to make fully informed data-driven decisions instead of relying on your gut or your instinct. So when we hosted this session recently, after each one, we offer a q and a session for our participants. And one of the questions that came up, which is certainly timely and relevant, was how am I able to stay competitive with the tariffs that are being imposed and really stay present with my clients? Not need to give everything away and just discount all of my prices. And so while the tariff conversation continues to move about, is it happening, is it not? Is it going to stick? Where is all of this going to land? I did still think that this was certainly relevant to bring to our listeners here, and so I wanted to talk a little bit about. Tariffs and how you can think about them as something that may be impactful to your business. So first, what is a tariff? It feels like it's something that's a little bit gray and nebulous. I talk to business owners and some of them aren't even really clear on what this is. So in the simplest term, what immediately comes to mind for me, whenever I think about a tariff is a duty. And you might say why is that? Basically think of a duty, I think. It comes to mind for me because it's more approachable and relatable. It's something that a lot more people are accustomed to hearing that word versus a tariff. And so if you think about it in that context, what is a duty is basically a tax that's being imposed on a good that's coming into the country. So as a consumer, it's something that you most likely have encountered, especially if you do a lot of traveling. So in the simplest terms, think about, I don't know if maybe you've been traveling a lot recently or over the last several years, if that's been on hold or how things are working for you. But the last time that you traveled, particularly in an airport, if you were going through the airport and you came across a duty free shop. That meant it was an opportunity for you to go in and purchase goods before they were going to be taxed or without a tax. And so in a very simple analogy, that is what you wanna be thinking about when it comes to the tariffs. Tariffs are taxes that are being imposed on goods entering the country. Typically. It's something that's used to stimulate, revenue or income, but. As the business owner it is an additional tax on the, good that you're bringing in. So if you're purchasing materials or a finished product, something that you're going to be selling to your end customer or using within your production, then yes, there's going to be an additional cost for that. So thinking about that from the consumer standpoint and the fact that a tariff is a duty. It is a tax that's being imposed on something. You would wanna be very cognizant of that as you're thinking about what your supply chain looks like. And so in response to the individual who asked this during our bootcamp and his question being, do I just need to slash my prices so that I can stay competitive? My answer to him was, you may not like this answer, but the answer is no. Being competitive solely on price. Is not generally the best solution any at any time. So looking at your competitor's prices and saying I'm just going to be lower than them because then that will allow me to attract more customers or clients is generally counterproductive. One, you have no idea what your competitors cost of goods are. What are their overhead costs? Do they own their building or are they renting? Do they have a lot of. Salary and wages, what are the other expenses that go into this and into running and operating their business. So it's not necessarily an apples to apples comparison for them to be able to break even at a certain price point. Doesn't mean that you can as well. And obviously our goal as a business owner is not just to break even, it's to be profitable. So you also need to be fully aware of what your costs are that go into getting your product or service out the door to make sure that when you are setting your pricing, it is set at a. A place that allows you to actually be profitable. So instead of thinking solely of immediately slashing prices to be competitive, especially in an economic climate and condition as we are currently in, I would encourage you to be thinking about reviewing your existing pricing, and your costs. Are there any opportunities to reduce the cost that you're seeing? So for example, if you are in a position and your cashflow supports it, if you're buying materials right now. Can you talk to your vendor or supplier to see about purchasing in bulk for a discount? Are you able to see about having payment terms so you maybe are able to get a discount on the payments that you're making on the purchases that you were already procuring? Are there other things that are either redundant or unnecessary in your. Production. Are there ways to optimize your production to be more efficient, in essence, to cut cost and control things on your end that way as well. So really it is a good opportunity to go back and slow down and assess, is my pricing actually adequate? Are there any things that I can do to modify within my current pricing model? And also thinking about what is your competitive advantage? So are there things that you offer that your competitors do not, that maybe you're not highlighting in your marketing? Are there. Other things that maybe are a value add that you can combine with your services. So for example maybe you offer a service and right now you're not offering any type of warranty or follow up or even a product. Is there an opportunity to add some type of guarantee or warranty or something that will allow your clients to be more confident and secure in the purchases that they're making And it's not going to have. Too much additional cost for you to provide that additional level of support and engagement. So those are some of the things that I would encourage you to think about. So for today's Action Accelerator, what I want you to do to help put this into play in your business right now is to think about your competitive advantage. What are some of the things that set you apart from your competitors? And see, are you highlighting those things right now? Because that may be a low hanging fruit opportunity. Instead of thinking about I need to be competitive solely on price. Think about how you can be competitive on value. And so that's what I want to encourage you to think about today. Additionally, if you do have any questions and are getting a little bit hung up on your pricing in general, I will include a link in today's show notes about a resource that my team and I have created, which is a pricing calculator. And I love this tool. It is an easy, approachable resource to allow you to actually put in your existing pricing to play around with different scenarios so that you can see what if we offer a discount factor in things like taxes that you're. Sales tax that needs to be collected if we wanna run a promotion or a sales offer, et cetera, and look at various scenarios so that it's very clear from a visual perspective everything that's going into producing your good or service, and then allowing you to actually play around with those numbers to make sure that your business is set up. For success and long-term profitability. So with that, thank you so much for joining me. I encourage you to continue to stay informed, be enlightened, and be empowered. I look forward to connecting with you on our next episode of The Enlightened Entrepreneur.