The consumer price index measures key costs for food, energy, select services and select commodities and rose 3.5% for the 12 months from March 2023 to March of 2024 according to the US Bureau of Labor Statistics.

The index in 2010 was $218.05 and in 2024 is $312.33.

This means that the value of $100,000 worth of goods and services in 2010 now costs you $143,234.77.

Prices have risen significantly and continue to climb as government and consumer spending chase goods and services in the market.

Interest rates have also climbed to a prime rate of 8.5%. Prime rate is generally considered the bellwether of the rates charged to commercial customers on their loans. Most typically, a spread over or under the prime rate determines the final interest charged for borrowing money. 

Historically the highest prime rate was 21.5% in December of 1980 and lowest at 3.25% in both December 2008 and March of 2020. When you look back on rates 8.5% was not uncommon.

However, coming off much lower interest rates a few years ago, the 8.5% cost of borrowing and increased material and supply cost seems to be making businesses take a fresh look at the projects they have planned.

While all of these factors need to be considered in the calculation of moving forward, some key considerations can advance a project forward in the face of this cost of money and materials challenge.

First, evaluate the need for the project with refreshed information. The pro-forma you had used may be based upon dated assumptions and you may need to look at scaling back on the project in an environment of rising costs.

Using more of the company’s cash reserves toward the project means financing less and thereby making the payment fit your operation more comfortably. The vision should be to rebuild your cash reserves from the success of the new project as cash reserves are desirable to have for any business to smooth out challenging business cycles.

Measure your company’s current success in terms of both dollar volume of sales and unit sales to determine the impact that needed price increases may have now and after the anticipated changes to the business. Do you need to reduce or eliminate unprofitable components of the business?

Reach out to new resources for your business that you may not have thought of before. The local chamber of commerce offers SCORE mentoring and the SBA (small business administration) has a rich resource area to potentially improve your strategic planning for growth.

SBA financing can offer amortizations that are attractive as well as improved choices for using less of your cash reserves to move a project forward.

Oftentimes, SBA resources are viewed as just being useful for new business, but current businesses can also take advantage of SBA funding choices.

While the costs of your project have increased, looking at new ways to complete your company’s growth are available and adjusting to change is part of any businesses challenge.

Be encouraged that your informed planning for the future will result in growth and opportunity for your business.