By Stefano Maifreni, Founder and CEO of Eggcelerate
If you are worried about the economy and think small businesses are in danger now more than ever, you’re not alone. Inflation and high energy prices walloped so many small business owners that some think businesses will not survive this economic downturn.
Are these fears justified? With so much uncertainty about how things will play out for businesses in the coming months and years, what can you do to keep your company strong and thrive – no matter what comes our way?
In this article, we will introduce you to some clever tactics to help protect your business against risks and minimise their impact on your financial standing. So, if you’ve been feeling the pinch due to the recession and are concerned about where things are headed, read on.
Spending Review
To ensure your company is prepared for the future, making a few core changes is critical. The first, and perhaps the most important thing you can do is find a way to offset the increasing cost of goods and services. It is probably the most immediate thing that might spring up in your mind. It’s also the easiest, to some extent, but potentially the most dangerous if you go too far and limit yourself to cost-cutting.
Setting up spending controls across functions helps companies to identify costs that are no longer justified or that could be avoided by doing work differently, e.g., cutting out any products or services not in use, which allows a business to prioritise expenses consistently and ensure that any savings identified are not slipping backward over time.
One of the biggest challenges for small businesses now is skyrocketing prices for raw materials, as well as the cost of transportation. One of the surest ways small-business owners can fight inflation is by stocking up on everything with a lower storage cost before prices go up even further. Businesses can lower costs by changing the composition of products, renegotiating prices and terms with current suppliers, and finding materials from new suppliers. It not only gives you better pricing, but it also allows you to diversify your risk.
Price Reviews
Ultimately, companies must look at their larger markets and what competitors are doing rather than simply looking at inflation. High inflation also strangles innovation, making it more difficult for companies to find the capital to undertake new investments and projects.
While raising prices is not ideal, it can help fight inflation’s effects on your company. For businesses that need to increase prices to cover costs, a more common approach is to raise them across the board. Especially those businesses with price-sensitive customers or fierce competition can implement creative pricing strategies to mitigate the perceived impact of a price increase, e.g., giving better payment terms, if the cash position allows, or transportation terms. Be careful, as raising prices may prevent some of these reductions, but you risk losing customers who do not perceive sufficient value in your products or services to justify paying more.
Operations Assessment
Think about whether your team could streamline processes and improve efficiency.
Furthermore, you can cost-effectively improve efficiency by investing in automation. Adopting digital technologies can help reduce costs across the business.
As they gear up to face higher inflation during this current inflationary period, companies must build more scalable platforms to grow, positioning them for strategic reinvestment into programs that deliver greater resilience and more robust buying and pricing power. Investing in resiliency and automation while cutting non-strategic costs can help companies keep growing.
Moreover, companies cannot go wrong with moving quickly and aggressively toward productivity and cash, boosting the capacity of their workers to provide greater value per person while controlling costs, thus increasing earnings and maintaining the ability to grow. These companies can prioritise working capital and seek opportunities to unlock trapped cash, manage longer-term liabilities, and divest from unprofitable or non-core businesses not providing a cash flow benefit. It can give them an advantage over competitors and improve each employee’s worth, cut costs, enhance services, and optimise operations, ultimately driving down their costs and increasing margin.
People Training
As inflation impacts, businesses across industries must review their jobs and determine which ones add the most significant value and are essential, providing both cost savings and an opportunity to direct funds and scarce labour resources toward things that will help them grow. Providing employee training will help implement this, and it will not only help attract the best employees but also help retain new joiners and existing staff.
One of the most significant issues facing many small businesses is employee retention. Many companies have difficulty retaining or hiring new employees due to the current economic crisis. Training not only makes your company a better place to work, but it also makes it more attractive to potential candidates.
Conclusion
If your business feels the pinch of the current economic crisis, it’s time to start working on a business survival plan. It means not only dealing with immediate problems but also taking a long-term approach to help your company survive in the long term. The current economic crisis has made it more challenging than ever for businesses to operate, but many have managed to survive and thrive in these trying times.
In times of uncertainty, you’ll need every advantage to thrive, which means taking practical measures to safeguard your company from the dangers ahead.
Recession-proofing your business is a proactive rather than reactive measure, and it means planning to survive the next recession and thrive during the upturn.
With some foresight and careful planning, you can protect your company from the effects of the current economic climate and help it thrive in the long run.
Biography
Action- and delivery-focused “efficiency geek” with an entrepreneurial spirit, able to link thoughts and actions, can anticipate and manage the tornado caused in operations by a butterfly flapping its wings in sales. Aware of the boundary between disciplined operations and bureaucracy, he can work “one level up and two down” if needed without fear of getting his hands dirty.
He has a background in the ICT industry, where he worked for blue chips and FTSE250 companies. Subsequently, He further developed and diversified his experience working closely with a portfolio of growing companies and start-ups in technology-intensive and innovative sectors, such as IT, Technology Manufacturing, Drones, IoT, AI, GreenTech and Insure/FinTech.
Stefano is the Founder of Eggcelerate. If you are a CEO of a small B2B business experiencing flat-lined results, Eggcelerate’s FlexCOO service will help you achieve focus and sustainable growth and bring your business back on track.
He has P&L management, international expansion experience, and international and intercultural expertise in managing, developing and leading cross-functional teams in complex environments.
Stefano is an Executive MBA graduate of the London Business School and a published author (Forbes, The Guardian, The Telegraph, and various SME-focused publications) on topics from Strategy to People and Operations.
