Fiscal Holidays are a Great Time to Plan Business Strategy
The financial holidays in August and October are both great times to plan a business strategy especially when business owners are feeling insecure. The annual inflation rate in the US accelerated to 9.1% in June 2022, the highest it’s been since November 1981. Prices for things like energy, food, and rent have skyrocketed, while stocks plummeted. Now that inflation is at a 40-year high and economists are hinting at a possible downturn, what can business owners do now to survive a nation of inflation?
The first half of 2022 was challenging, with soaring inflation, global demand shocks, the biggest selloff of bonds in 40 years, a huge decline in stocks, and the implosion of crypto. The current economic situation was caused by multiple factors, including clogged global supply shocks and the Russian/Ukrainian conflict. Now, the Federal Reserve is working to moderate demand and lower prices, which raises concerns that the U.S. is headed for a recession.
While things are unstable nationwide, certain states are faring better than others. CNBC recently ranked the top states for business, based on a variety of data and performance metrics. Top performers included North Carolina, Washington, Virginia, Colorado, and Texas. Those at the bottom of the list included Rhode Island, Hawaii, New Mexico, Alaska, and Mississippi.
So, what can we expect in the coming months? During the Great Recession, from 2007 to 2009, the construction and manufacturing sectors experienced disruption, with significant employment and profit decreases. This makes sense because during economic downturns, people usually limit their discretionary spending and delay big purchases, including cars and new homes. Expect this trend to occur again if the United States experiences another recession in the coming months.
Experts predict that the most recession-proof industries will include healthcare, government, computers and IT, and education because people depend on these services regardless of the economy. Additionally, these industries tend to be less sensitive to interest rate variations.
“While the volatile economy can be nerve-wracking for business owners nationwide, there are concrete things you can do to get a handle on your company’s finances. For instance, developing a strategic plan can empower you to have more control over your financial security and feel more optimistic about the future,” says Raj Tulshan, founder of Loan Mantra.
August 14, National Financial Awareness Day, and October, National Financial Planning Month, are perfect times to conduct an annual financial checkup. This means assessing how your business is doing, determining what’s going well, identifying what needs improvement, and setting concrete financial goals for the coming year. The experts at Loan Mantra are helping companies boost their financial health, making the process simple, transparent, and effective.
Loan Mantra offers the following tips to help business owners become more financially secure:
Take control. Recognize there are certain things you can’t control (such as whether the U.S. tips into a recession), and certain things that you can. Make a proactive effort to get your finances well in hand. Update your business plans, pull your current credit report, and talk to an expert about your financial health, including your money goals. Organize and file your paperwork, ideally in a secure, online system, like Loan Mantra’s vault, so you’re able to access necessary financial information instantly and easily whenever you need it.
Embrace a warrior mindset. Be strong and remember this, too, shall pass. On average, recessions last 11 months. The shortest one on record was in 2020, when the pandemic spurred a recession that lasted only three months. And while stocks are currently low, they’ve historically bounced back after recessions. This is a good time to talk to a financial advisor about how (and where) to invest so you can take advantage of the eventual recovery.
Reduce non-essential spending. Businesses should regularly audit their spending, but this exercise is especially important during tough economic times like these. Consider whether there are any services or resources that you can reduce or eliminate. Comparison shop for any products that you use regularly to try and get a better price. Consider switching suppliers to get better deals.
Eliminate debt. Pay off credit card balances and other debts as soon as possible. With interest rates rising and a possible recession coming, this becomes even more critical. Get a low-interest business loan or consolidate debt. You’ll pay off your credit card debt much faster if you transfer high-interest debt to a credit card with a 0 percent rate. If you don’t qualify for a 0 percent credit card, call your current credit card company, and request an interest rate reduction. Ask a financial expert for advice on the best and fastest ways to pay down your debts.
Invest in your existing customers. Acquiring a new customer costs, on average, five times more than retaining an existing customer. The cost of recruiting new customers is even more costly and difficult during a recession, when people are trying to minimize their spending and are, therefore, less likely to buy new products or services. Your current customers already know how great your company’s products and services are, but during tough times, you’ll need to maintain (or increase) standards to keep them happy, satisfied, and loyal.
Streamline your offerings. As you take an honest assessment of your organization’s finances, consider whether you’re still offering products and services that are no longer performing well. It’s wise to eliminate anything that is utilizing your resources but no longer generating high sales or profits. Trimming underperforming areas can help you focus on the more profitable ones. This will allow you to put time, money, and energy into your top sellers and innovate promising new offerings.
Be transparent. As a business leader, your team is looking to you for guidance during economic uncertainty. Transparency is the best way to give that to them. While it may be tempting to be overly positive, your team craves honesty and authenticity. Your employees don’t want to see their leaders presenting a fake facade that everything's fine when it’s not. They want to see that the people in charge can lead confidently and strategically, particularly during difficult times.
Continue marketing. While your company might be looking for areas to reduce spending, marketing shouldn’t be one of them. With a turbulent economy – and a recession looming – do whatever you can to stay top-of-mind among customers and prospects to boost sales. As consumers become more careful with their spending, remind them why your product or service is essential. While other companies may reduce or eliminate marketing efforts to cut costs, you should do the opposite. If you maintain (or even increase) your marketing spend, you’ll stand out in the marketplace and reach a wider audience. While this may not pay off immediately, it will be beneficial over the long-term, as people start spending more in the post-recession months and years to come.
Rebuild locally. Invest (or re-invest) in local infrastructures that support your own communities and encourage these local businesses to support your company, as well. Support local restaurants, energy, banks, farms, auto repair, etc. Invest locally to strengthen your community’s business ecosystem.
Find your tribe. Some common adages are true in our current economic climate. There is strength in numbers, and we’re all in this together. It’s wise to network and find like-minded business owners to share ideas and best practices. Support one another. Cross-promote your goods and services whenever possible.
Brace for impact. In any economic environment, it’s smart to hope for the best but prepare for the worst. If the past two years have taught us anything, it’s that life can be unpredictable. Therefore, it’s important to plan for the unexpected. While it may be unpleasant to consider, have a succession plan in place in case your business owners or leaders are injured, incapacitated, or even die. Decide who will fill these roles temporarily or permanently in an emergency. Prepare top performers for future leadership roles. Ensure they have plenty of training, mentoring, and experiences so they can successfully grow upward in your organization. Consider how you’d handle a variety of crisis scenarios to ensure your business remains successful, seamless, and uninterrupted.
Working with a financial expert, restructuring debt, becoming agile, analyzing your business processes and reducing expenses can help your business succeed and become more financially stable. Not sure if your business is fiscally fit? Take our test today!
About Loan Mantra
Loan Mantra is a one-stop FinTech business portal that democratizes the loan process by providing corporate sized services and access to new entrepreneurs, small and medium sized businesses. Loanmantra.com provides access to numerous loans and lenders, government programs and small business services all through one easy application process and upload of business information ONE time.