Disclosure. I am a licensed Financial Security Advisor, Mutual Fund Representative, and Group Insurance & Annuity Plans Advisor. I am not a lawyer, tax lawyer, or accountant. I discuss taxes only as they relate to specific insurance, investment, and estate strategies; I do not provide general tax optimization or comprehensive financial planning. Content is educational only. Mutual funds offered through WhiteHaven Securities Inc. Insurance products offered through iAssure Inc. Coordinate decisions with your CPA, notary, or lawyer. See Disclaimer and Privacy.
Why this is important
Pricing power determines whether you absorb inflation or pass it through. Some business models do this better than others.
Operations: collect fast, pay slow, convert cash to short-term assets.
Balance sheet: lock in fixed rates, avoid variable debt, consider borrowing now to acquire real assets.
Investments: equities, gold, real estate, energy, and commodities pass inflation through. Cash does not recover.
Four areas where business owners can take action now
The Time to Act Is Before Inflation Peaks
If felt inflation is already 5 to 8% and could go higher, the cost of waiting is measured in permanent purchasing power loss. Cash does not recover. Real assets can. The question is not whether to act, but how.
1. Business Model: Can You Pass Inflation Through?
The most important question in an inflationary environment: how fast can you raise prices without losing customers?
Can raise prices as costs rise. Customers absorb increases because alternatives are limited.
MODERATE PRICING POWER
Differentiated products or services. Professional services, premium brands, subscription businesses, B2B with switching costs.
Can pass through some costs. Must communicate value. Transparent, gradual increases work better than sudden jumps.
WEAK PRICING POWER
Commoditized products, high competition. Basic retail, hospitality with many alternatives, price-sensitive consumer goods, low-switching-cost services.
Raising prices loses customers to competitors. Must absorb costs or find efficiency gains.
What to do:
Audit your product and service lines. Which have strong pricing power? Focus resources there.
Consider "good-better-best" pricing tiers. Let customers self-select based on value sensitivity.
Raise prices in small, predictable increments. Customers tolerate gradual increases better than sudden jumps.
Communicate honestly. "Our costs have increased" is understood by business clients.
If pricing power is weak, focus on efficiency. You cannot pass through what customers will not pay.
2. Operations: Cash Management in Inflation
In inflation, cash loses value every day it sits idle. Operating cash management becomes critical.
Collect Fast
Shorten payment terms. Net 30 becomes Net 15.
Offer small discounts for early payment.
Require deposits or prepayment for large orders.
Invoice immediately. Every day of delay costs money.
Pay Slow (Within Terms)
Use the full payment terms. If it is Net 30, pay on day 30.
Negotiate longer terms with suppliers if you have leverage.
Avoid early payment unless discounts are substantial.
Lock in supplier contracts at current prices where possible.
Convert Idle Cash
Operating cash sitting in chequing accounts earns nothing.
Move excess to short-term instruments. Even small yields beat zero.
Consider Treasury bills or money market funds for operating reserves.
Keep only what you need for near-term operations in chequing.
The principle: Money received today is worth more than money received tomorrow. Money paid tomorrow costs less than money paid today. The spread compounds.
3. Balance Sheet: Fixed Rates and Real Assets
Variable-rate debt is dangerous in inflation. Fixed-rate debt becomes cheaper in real terms as inflation rises.
Variable Rate Warning
In the 1970s and early 1980s, variable rates rose to 20%+. Businesses with variable debt saw their interest costs triple or quadruple. If you have variable-rate lines of credit or mortgages, consider locking in now.
Fixed-rate strategies:
Convert variable to fixed. Even if the fixed rate is slightly higher today, the certainty may be worth it.
Lock in longer terms. A 5-year fixed rate gives you 5 years of predictable costs.
Finance long-term assets now. Machines, vehicles, equipment you will need. Lock in today's prices and today's rates.
Consider borrowing to invest in real assets. If your balance sheet is healthy, fixed-rate debt to acquire real estate, land, or other real assets may make sense. You repay with future dollars that are worth less.
Cash positions: Corporate cash sitting in the bank loses purchasing power every day. If you do not need it for operations, it should be working.
4. Investments: Inflation Protectors
Some asset classes have historically preserved purchasing power through inflation. Others have not.
Equities (Stocks)
Companies can raise prices. Earnings grow with inflation. Stocks go through downturns, but history shows recovery. Over decades, equities have outpaced inflation.
Gold and Precious Metals
Gold has been a store of value for thousands of years. It does not generate income, but it tends to rise when fiat currencies fall. Central banks are buying at record pace.
Real Estate
Property values and rents tend to rise with inflation. Real estate is tangible. It generates income. Financing can be locked at fixed rates.
Energy & Commodities
Oil, gas, mining, materials. These sectors pass inflation through immediately. When costs rise, commodity prices rise. Direct exposure to the forces driving inflation.
A Question for Conservative Investors
If you have positioned your corporate portfolio conservatively, with GICs, bonds, or cash, this is worth considering:
Stocks will go through downturns. History shows recovery. The S&P 500 has recovered from every crash. The market dropped 50% in 2008 and was higher within a few years.
Cash devalued by inflation does not recover. If inflation is 8% and your GIC earns 4%, you lose 4% purchasing power. That loss is permanent. It compounds.
Which risk would you rather take?
This Resonates If...
You have significant cash or GICs in your corporation
You have variable-rate debt or lines of credit
Your business has thin margins and limited pricing power
You are planning a major equipment or real estate purchase
You are building wealth for the next 10 to 20 years
Summary: The Four Areas
Area
Key Action
Business Model
Assess pricing power. Focus on high-margin lines. Raise prices gradually.
Operations
Collect fast. Pay slow. Convert idle cash to short-term instruments.
Balance Sheet
Lock in fixed rates. Avoid variable debt. Consider borrowing to acquire real assets.
Investments
Equities, gold, real estate, energy, commodities. Cash does not recover from inflation.
Inflation, Corporate Investing, Business Owner Strategy, Asset Protection, Pricing Strategy
Full Disclosure.
This content is for information and education only. It explains general concepts that may apply to incorporated business owners, but it is not personalized tax, legal, or investment advice.
Tax Considerations:
Tax rules are complex and subject to change
Strategies and benefits depend on your specific circumstances, province, and business structure
Always consult with a qualified CPA before implementing any tax strategy
Provincial variations in rates and rules may apply (Québec vs. Ontario differences exist)
Past tax treatment does not guarantee future treatment
Investment Risk Disclosure:
Investing involves risk, including the possible loss of principal
There is no guarantee that any investment strategy will achieve its objectives
Investment values fluctuate with market conditions, and you may receive less than you originally invested
Tax efficiency is one factor; risk, fees, and total returns all matter
Past performance does not guarantee future results
Insurance Illustrations:
Insurance illustrations show projected values based on assumptions that may not be guaranteed
Actual results will vary based on factors including interest rates, mortality experience, and expenses
Non-guaranteed elements (such as dividends or credited interest rates) are not promises of future performance
Review both guaranteed and non-guaranteed projections with your advisor before making decisions
Content Accuracy:
We strive to ensure information is accurate and current, but laws and regulations change frequently
Information reflects our understanding at the time of publication and may not reflect subsequent changes
If you believe any content contains an error, please contact us
Regulatory:
Mutual funds are offered through Valeurs Mobilières WhiteHaven Inc.
Insurance products and certain other services are provided through iAssure Inc., an independent firm in the insurance of persons and in the group insurance of persons
These activities are neither the business nor the responsibility of Valeurs Mobilières WhiteHaven Inc.
Professional Advice:
This article is not a substitute for professional advice from your CPA, lawyer, or financial advisor
Work with your professional team to understand how these concepts apply to your specific situation
For personalized advice, a formal engagement and suitability review are required
