By Emeka Anaeto, Business Editor

It is no longer news that cost of doing business in Nigeria today is on steady rise given the inflationary pressures that has been in the economy for several consecutive months now. Added to this pressure now is the over 260 percent jerk-up in energy cost last week and many analysts predict that the spill over effect will happen in the next few weeks or even days as rise in transport cost takes immediate effect.

So what do you do as a small business owner?

You can do anything but don’t give up, don’t fold up.

Let me adopt a Harvard Business School model for this challenge to Nigeria’s local and present circumstance.

Cutting expenses is a vital part of how businesses should deal with inflation. A study of 5,700 global companies showed those that cut costs to improve productivity during inflationary periods showed higher survival rate and returns.

In our present circumstance in Nigeria, as businesses that have now been plunged into higher inflation in this new government, new environment, companies will need to make moves that not only cut costs but also build more scalable growth platforms, positioning them to strategically reinvest in products and or services that deliver greater resilience and stronger purchasing and pricing capabilities.

They need cost programs that allow them to grow top-line revenue and reduce their dependence on volatile energy markets while improving employee retention.

Some strategic repositionings could be made including the following:

Get spending visibility:

High-resolution spending visibility is the foundation of any expense management capability. It enables managers to fully understand where money is spent and who spends it. In an inflationary period, it is critical to establish repeatable, end-to-end, actionable visibility of spending by cost category, business process, function, and business unit. This is the foundation for all other productivity efforts. It enables the right level of accountability throughout the organization to ensure that all decisions are made knowing the full impact on the profit and loss figures.

Differentiate between strategic and nonstrategic spending: In any disruptive environment, odds are higher that business managers may make choices that jeopardize the company’s long-term strategy. It’s not uncommon to make broad-based cuts that are not aligned with the company’s strategy — and as a result, will not yield optimal return on investment nor maximize value chain in the long run. Instead, clearly distinguish between strategic and nonstrategic cost-cutting, the protecting of signature customer and employee experiences, and fiduciary requirements.

A sustainable cost management system should fuel a company’s strategy and enable the business to out-invest competitors, at scale, on strategic costs in both good and bad times.

Managers must identify where investments should be pulled back and cost savings realized; where you can more selectively trim costs to improve the return on operating expenses; and where you can boost growth through greater investment in the strategic capabilities needed to achieve differential results. This investment posture sets the stage for reshaping the profit and loss figures.

Unpack the drivers of spending: With improved visibility and a clear sense of how costs align with strategy, the next step is to develop a more robust understanding of the real drivers of cost in an inflationary environment. Dissect the rate (prices paid) and consumption (quantity or volume), including the underlying drivers, for critical cost categories. This step enables companies to create granular, trackable initiatives linked to a unique driver of a broader cost category. It sets the stage for a host of possible moves.

We will continue this discussion in the subsequent editions.