Obviously, tariffs have been in the news. Everyone’s talking doom, but no one’s talking tactical.
Losing sleep over this isn’t productive. Instead, you need a systematic way to understand and mitigate their impact on your business.
Here’s a simple exercise:
First, quantify the actual impact.
Look at your unit economics – particularly COGS as a percent of revenue. If COGS is 25% of sales, and tariffs increase that by 10%, you can quickly calculate the hit to your gross margin and bottom line.
This gives you a clear picture of how much you need to make up.
For example, let’s say you’re running a $10M business with 25% COGS ($2.5M). If tariffs increase COGS by 10%, that’s a $250,000 hit to your profit. This gives you a clear target: you need to find a quarter million in savings or additional profit to stay even.
Next, get clear on your options
You have immediate-, medium-, and long-term solutions available to you. Medium- to long-term strategies require deeper conversations – the type we have with clients all the time.
But in the immediate-term, the two most common options are:
- Cutting fixed costs
- Raising prices
You probably won’t be able to recoup all the profit from one spot, and that’s okay. The key is having a mental inventory of what you could adjust – perhaps delaying that $50,000 agency contract, postponing a product launch, or trimming $15,000 monthly in discretionary spending.
Remember, a 10% increase in costs doesn’t necessarily mean a 10% hit to profit.
The actual effect depends on your margin structure. For instance, in the example below, you’ll see that a 10% tariff only amounts to a 3.3% hit to gross margin.
Understanding this helps you sleep better, knowing you have a clear understanding of the impact, and an action plan ready if needed.
Here’s the reality – even without tariffs, not everything is going to go smoothly for your brand this year.
A marketing experiment will go over budget, an employee will leave, you’ll get locked out of your Facebook account, or something else entirely. Any one of those could be more disruptive than tariffs to your bottom line.
The big takeaway? You need a plan. You can’t control everything, but you can always control how prepared you are to respond.
We built a Tariff Impact Calculator for you to input your own numbers. You can download the spreadsheet version here, or use the interactive version below.
