With many businesses still recovering from the pandemic, from supply chain issues to inflation pressures, another test is coming: a recession. About 80% of small business owners anticipate a recession this year as the Federal Reserve continues raising interest rates to combat inflation. From rising costs, labor shortages, and ongoing supply-chain snarls, business owners have a right to be concerned. Larger companies are often better suited to survive a downturn due to having financial cushion—small businesses don’t always have that luxury. Here are three tips to help your business prepare during uncertain times:
To preserve margins, business owners face a dilemma between increasing prices or reducing costs. Owners often avoid increasing prices to preserve customer trust since right now customers themselves can’t afford to spend more. Cutting costs is hard since fifty-seven percent of small businesses have already cut costs during Covid.
Making smarter buying decisions helps improve your margins without impacting prices for customers or their experience with your business. Most businesses have already streamlined spend on their most frequently purchased items. But optimizing costs beyond these top products can seem daunting and time-consuming to small business owners. Thousands of items are purchased from hundreds of suppliers, and that spending is very often not properly tracked. However, using intelligent spend tools can help you gain a big-picture view of spending across your business without expending additional human capital. By tracking your current spending and monitoring buying patterns, you can use that data to influence smarter spending decisions and pinpoint opportunities for savings. With these analytic tools, you can see your business' purchase history and then use that data to identify top spend categories, spend from preferred and restricted items, and find opportunities to direct spend towards less expensive items.
With labor shortages and pressure on margins, small business owners need to find ways to invest in their teams and free up time for their employees to focus on delivering value for customers. Leveraging technologies to automate and simplify your procedures is a must.
For example, Amazon Business can simplify the purchasing process and increase transaction speed by enabling transparency across multiple suppliers, giving businesses access to greater selection and dynamic pricing without the burden of managing suppliers’ identification, onboarding and management. Buyers and administrators can create lists to streamline future purchases, track orders through the entire fulfillment process, optimize sourcing costs by analyzing purchase orders, and leverage helpful analytics. A one-stop website eliminates extra steps in the purchasing journey and enables businesses to focus more on their operations, employees, and customers.
Recessions can be a moment of truth in building relationships with customers. It is paramount to stay alert to customers’ trends and propose services and/or products that resonate with their values. Of course, it’s impossible to summarize all customers’ trends across industries and geographies, however, there is a common theme that has grown over the last few years: responsible consumption, such as supporting the community by buying more from local sellers, or promoting diversity by supporting minority-owned businesses, or buying products that have sustainability certification to support environmental goals.
Rethinking the way you buy and operate can also be an opportunity to better address these trends. Why not integrate responsible goals within your purchasing process? If you are partnering with other local small or minority-owned businesses, promote it. Buying local keeps dollars within the community. Showcasing the proximity and impact your business provides to the community helps build trust with residents, where local dollars generate more local wealth, charitable contributions, and jobs, making you stand out from competitors.
Additionally, keep communication steady with information on your business, upcoming sales, or if there are issues with stock or delivery. You've worked hard to build trust with your base. Make sure that you don't forget about customers during these times. If they are happy, they will continue to support you with repeat business and share with friends and family.
While you can't control a recession, take the time to focus on what you can control – your business. Preparing for the challenges now, leaning into smart changes, and further optimizing your procedures to deliver for your customers will help set you up for long-term success.
Originally published on Entrepreneur.com.
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