Today’s economic climate has many moving parts—tariffs, interest rates, pending tax changes, changing consumer preferences. They combine to create a period of uncertainty. What are small businesses supposed to do?
Here are some ideas to be proactive despite this uncertainty.
Strengthen your financial resilience
To best withstand whatever happens, put your financial house in order:
- Review your budget. “Lean and mean” is what most small businesses strive for when it comes to their budget. Look to see if you can reduce any expenses to tighten up yours.
- Build a cash reserve. It’s generally advisable to have a reserve of 3-6 months. Creating this reserve isn’t easy, but any set-asides can help.
- Pay down debt. Interest rates are still high, and debt servicing is a drag on your cash flow. The more debt you can eliminate, the best off you’ll be.
- Create access to capital. If you don’t already have a line of credit, think about getting one. This will provide funds to take advantage of opportunities (e.g., perhaps buying inventory or supplies at a discount) or seeing you through an emergency (e.g., an unexpected major repair).
Monitor developments
You can’t be an ostrich; you must pay attention to what’s going on in Washington, Main Street, Wall Street, and even globally. Keep watch for regulatory changes that may impact your business. Watch for industry changes that affect pricing, customer preferences, tech developments, and what competitors are doing. Follow economic indicators, such as inflation and interest rates, that clearly help you make business decisions.
Work your network
The old cliché of “it’s not what you know but who you know” can be of great value during a period of uncertainty. You can reach out to get information, opinions, and resources to help you. Talk to:
- Your customers. Stay in touch. Some customers may cut back in their business with your during times of uncertainty. Maintain a connection and retain customer loyalty, even if there are no current transactions.
- Your employees. Keep them informed about what’s happening in the company. In periods of uncertainty, employees may be anxious about layoffs, benefit cuts, and other company-related matters. This will help retain your valued staff.
- Other business owners. Find out what they are experiencing and what they’re doing about it. You can connect with other local business owners through your chamber of commerce or other business networking groups.
- Your advisers. Be sure your CPA or other tax adviser is keeping you up to date on what you can or should be doing to optimize coming tax opportunities. Ask your attorney about any changes in the offing that affect dealings with your employees.
- Business organizations. NFIB publishes the Small Business Optimism Index each month reflecting the sentiment of small business owners on plans to increase employment, make capital outlays, increase inventories, credit conditions, and more.
Final thought
“If there’s one thing that’s certain in business, it’s uncertainty.” ~ Stephen Covey, author of The 7 Habits of Highly Effective People and more
While uncertainty can be stressful for small business owners, it doesn’t mean business stops. It can be a great time to reflect, to build, to redesign, and to grow.
For additional resources on the subject of economic conditions affecting small businesses, see this list of blogs.
