Heather Hall //January 25, 2023
Heather Hall //January 25, 2023
As our economy continues to slowly emerge from a once-in-a-century pandemic, it’s no wonder business owners feel uneasy about financial decisions that were once considered routine.
Demand for goods and services continues to outpace supply. Businesses face labor shortages that have led to the strain of increased wages. Supply chain challenges are delaying projects and business cycles. The Fed is trying to squash inflationary pressures by raising interest rates.
All of these factors have contributed to today’s uncertain economic climate, and 2023 may present similar challenges. As a business owner, it may be hard to come to grips with the fact that you can’t be in control of all the external economic forces working against you. That’s why your focus needs to be on what you can control. Of course, none of us has a crystal ball to predict the future, but there are tangible, strategic measures businesses can take to blunt any negative impacts.
The first step is to get a clear view of your business’s solvency by closely monitoring profit and loss, operating expenses, and revenue streams. Pay attention to how each of these fluctuates based on seasonal activity, the impact of inflation, the change to your cost of capital and discretionary spending trends.
Develop multiple business plans for different scenarios. It’s good to have a primary operating plan, but also have a backup in case the economy takes a sudden downturn or makes a faster-than-expected rebound on which you can capitalize. In either event, a working capital line of credit can help normalize cash flow irregularities and provide funding when revenues decline or are delayed.
If you’re in the services sector, be sure to listen to your clients and understand their challenges. They’re excellent predictors of the year ahead, and opening up lines of communication allows you to explore better ways to partner with them.
Smooth cash flow problems by reducing payment/receivable cycle time. Establish new ways to get paid, such as an e-commerce storefront, automated clearing house (ACH) and business-to-business card payments. The goal is to ensure you have a payments partner that settles quickly and gets your funds to you fast.
With employee recruitment a continuing challenge, revamp your hiring process to handle ongoing churn issues. A new process should include faster training and integration to continue your company’s ability to protect operations and, of course, revenue streams.
Keep an open line of communication with your current employees. Listen to their ideas and show them you value their counsel and dedication. One or two good ideas could change the course of a company’s future forever. Added communication and appreciation also can go a long way to keep your team together at a time when the job market continues to be volatile.
Lastly, be open and flexible to new ways of doing business – and revisit previous ideas. Opportunities previously discarded might be the perfect fit now.
Just remember, as a business owner, you cannot always predict the future, but with a few simple steps and an open mind, you can prepare for any potential outcome to help protect your company and valuable employees.
Heather Hall has more than 20 years of success in the financial and banking industries in the capital region and is executive vice president at Mid Penn Bank, which has offices in Lehigh, Bucks, Berks, Montgomery and Schuylkill Counties, among many others.