“You have to include inflation in your annual revenue and expense forecasts. You have to treat inflation as an annual fee your business pays into the economy. If inflation is 2% for example, that means the economy is charging your business a 2% annual fee and so you gotta make sure your income and total assets grow at minimum 2% annually just to keep up” — Hendrith Vanlon Smith Jr
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Hendrith Vanlon Smith Jr is advising businesses to account for inflation when planning their annual finances and growth. The quote suggests that if inflation is at a rate like 2% in a given year, that effectively means costs across the economy are increasing by 2% on average.
Therefore, Smith argues businesses need to factor this “annual fee” of inflation into their revenue and expense forecasts to ensure income and total assets increase by at least 2% just to maintain the same purchasing power and profitability. If a business does not grow more than the inflation rate, it is effectively losing value and falling behind in real terms.
The overall message is that smart financial planning requires incorporating expected inflation into projections, as rising prices can erode profits if not properly compensated for through revenue growth.