Navigating Your Small Business Through Economic and Market Turmoil
It is difficult enough for small businesses to confront the challenges of growth, but many are not prepared for the volatility and uncertainty that pervades the market and the economy today. Small businesses must be able to navigate real hurdles just to stay in the game. Still, the more significant threat may be the perceived hurdles thrown up by consumers who lose their confidence during periods of economic stress and stock market uncertainty. The combination of real and perceived threats can create an untenable situation for small businesses not prepared to navigate the choppy waters ahead.
Managing Your Business in the “New Normal” Economy
Standard management practices are less effective for businesses being rocked by the relentless pressure of external events, such as inflation, a declining stock market, or local market turmoil. Small businesses must be prepared to manage their growth through periods of sustained volatility, adopting guerilla-like tactics to replace the standard management playbook.
Emphasize Short-Term Planning
Successful business managers are taught to focus on the company’s vision and its long-range plan. However, during times of uncertainty, the emphasis should shift to short-term planning to ensure all contingencies are always covered. This doesn’t mean you have to abandon long-range planning. The need to stay on top of all horizons never goes away. But, it would be essential to have more frequent discussions about a number of minor issues so they don’t become significant issues. For any regularly scheduled planning meetings, short-term issues should take precedence; it would be necessary to schedule frequent, brief meetings to ensure the complete coordination of resources in addressing short-term issues.
Know Your Weaknesses
Another page from the manager’s playbook says to focus on your strengths. But it also says to continue to work on your weaknesses. In periods of relative stability, working on your weaknesses may not be as important. But, in periods of uncertainty, weaknesses should be acknowledged, and if they can’t be fixed, they should be deliberately counterbalanced. This especially applies to any operational or personnel issues. It may be time to hire a consultant to bring a fresh perspective to your business practices.
Know Your Cash Flow
Having an inaccurate picture of your cash flow introduces more uncertainty to your business. To avoid any unexpected cash crunches now is the time to upgrade your cash management processes to ensure timely inflows and outflows and maximize cash on hand. It is also time to regularly create and analyze cash flow projections over 13- and 26-week periods. This will enable you to spot trends that can impact cash flow in the future.
Convert Fixed Costs to Variable Costs
Having been shocked by the COVID recession, many businesses have already begun converting their fixed costs into variable costs. Variable expenses are more easily controlled during slowdowns. Outsourced services are one of the primary ways to reduce fixed costs. Many businesses have moved to variable pay wherever they can, such as relying on commissioned salespeople or increasing production incentives. Converting your infrastructure to pay-per-use, such as with contract manufacturing, can also decrease fixed costs. The quickest way to reduce fixed costs is by outsourcing administrative functions, such as payroll or record-keeping. You can also look to see where long-term contracts can be shortened without raising your costs.
Stay Focused on Fundamentals
Nothing is more fundamental to your business than ensuring your customers are happy.
During a period of market uncertainty, you may have to change several facets of your business, but your focus on delivering excellent value to your customers should never change. It is essential to keep your ear to the ground to know what is going on in your market and what your customers are thinking. Having candid conversations with your customers and prospects is the best way to monitor their attitudes while letting them know you care.
You Don’t Have to Go it Alone
For now, at least, starting and running a business means taking on all the challenges an uncertain or volatile market presents. It can be frustrating for business owners because they are confronting elements over which they have no control. It’s also very difficult for small business owners to go it alone when things go bad. Building strategic partnerships with the Chamber of Commerce, community leaders, and other like-minded business owners can be crucial to keeping some semblance of control over local conditions that can affect your business.
Establishing and maintaining a trusted relationship with your bank can ensure you have a source of capital before the need arises. By meeting with your business bank regularly, you can keep your relationship manager updated on your business finances, and you will know the questions you might be asked when the time comes to secure a loan or a credit line. They will also be able to provide you with an outside perspective on your strengths and weaknesses.
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