Small businesses are bracing for the financial fallout from the Fed’s latest rate hike. Coupled with inflation, which remains the top concern, small businesses feel intense pressure from all sides. In order to navigate all this financial turmoil, manage cash flow and stay afloat, business owners must take action. Here are five steps that will help you survive this time and emerge stronger on the other side.
1. Cut Costs
If you haven’t already, the first item on your list should be reducing expenses. The time frame to make meaningful changes to your budget is decreasing since many small businesses haven’t seen a bear market in a long time.
In addition to cutting costs, it’s important to do more with less. This message can be frustrating for entrepreneurs to hear, as they’re already proverbially squeezing blood out of turnips. But the message here isn’t about working harder; it’s about working smarter. Evaluate your current tech stack and consider what’s necessary, as well as what might be missing.
Also consider if you’re getting the most out of automation. Automation tools can take care of repetitive (but necessary) daily tasks like billing, appointments and email follow-ups, so small business owners can focus on strategic tasks. Maximizing automation will help you get more done in the day by reducing manual work, and ensure you aren’t missing an opportunity to interact with a customer. Automation separates the floundering businesses from the thriving businesses. The more you automate, the more efficiency and profit you have in your business.
2. Reevaluate Your Financial Position
Next, take a good, hard look at your finances. Change the terms of any loans you can, so you get more cash – now. Additionally, review how you handle your largest bank accounts. In general, businesses should keep their money in larger, more established banks. Since the FDIC only guarantees up to $250,000 per depositor at each insured bank, spreading out in multiple accounts across different banks is a good practice.
3. Put Customers First
Despite all the doom and gloom, remember that consumers are still spending, especially on products. This is the time to invest everything you have into your customers and prospects. Identify opportunities to deliver more value to them. Build deeper relationships. A solid customer relationship management (CRM) system can help you do this, without adding more to your workload. Take stock of your current customer list and whether it’s sufficient to help you reach your goals. If not, invest in lead generation activities to capture more potential customers.
Furthermore, use lifecycle automation to re-engage customers and create fans. Thoughtful email nurture campaigns, for example, can turn a happy customer into a true advocate. Many businesses approach this as an afterthought, but it’s important to make it a priority. When the economy is uncertain, you need every customer and repeat purchase you can get.
4. Think Long-Term
The cost of debt keeps going up, which means it’ll eventually break. This is good to keep in mind because it keeps this season of struggle in perspective. All too often, entrepreneurs make short-term decisions out of panic and fear, later coming to regret it. One example of this is layoffs. When a business owner hears the economy is declining, they might make a knee-jerk decision to let team members go. But this isn’t always the best route.
In fact, it can often backfire, leaving them with too few employees to produce their products or services and meet the needs of customers. It can create a negative snowball that leads to the loss of customers and loss of revenue. Sometimes, of course, layoffs are necessary. But it’s important to take your time and think big-picture when making such decisions rather than acting on impulse.
5. Be Prepared to Pivot
You can do everything right and still come up short. Sometimes, even the swiftest cost cutting and most strategic financial changes can’t keep your business from feeling the effects of the economic upheaval. In these scenarios, you can still survive if you’re prepared to pivot.
Make sure to make new plans as you receive new information. Have a backup plan in place that corresponds to one potential set of circumstances, and then have a second backup plan for a separate set of circumstances. At some point, it will be clear if your current approach isn’t working. If this happens, doing something different might not just be a path forward; it might be the only viable one.
Rate hikes, inflation and overall financial turmoil can be some of the most challenging foes a small business owner can go up against, especially all at once. But there’s one undeniable truth about entrepreneurs: they’re resilient. By being bold in cutting costs, reevaluating your financial position, putting customers first, thinking long-term and being prepared to pivot, you’ll be able to make it through this time and learn some lessons that will serve you in the future.
Clate Mask is the CEO and Co-founder of Keap. @ClateMask.
Cutting costs stock image by wutzkohphoto/Shutterstock