Jim Granat is the Small Business Manager at Enova International . It connects SMEs to loans through Headway Capital and Business Backer.
The economic landscape of small businesses has been complex and has changed rapidly in recent years. Many small business owners are struggling in the current economic climate due to inflation, supply chain issues and labor shortages due to the Covid-19 pandemic.
What does the data show?
Inflation and labor shortages remain the top concerns of small business owners. A November poll by CNBC and SurveyMonkey found that 92% of small business owners are concerned about inflation, with 45% citing inflation as the biggest risk to their business. As of this writing, the US Chamber of Commerce labor shortage index is 0.68 (which means there are 68 workers for every 100 jobs).
At the same time, these factors are offset by very high consumer costs in many areas. According to the US Department of Commerce, consumer spending rose 1.8% in January. One hypothesis for this phenomenon is built-in consumer demand and savings due to Covid-19. If so, then we know that this level of spending cannot continue indefinitely.
In addition, the indicators show a decline. Many small businesses believe the US is already in a recession, 49%, according to a CNBC poll by SurveyMonkey in November. And the Conference Board's leading economic index fell 3.6% in the six months from August to February.
What does all this mean for small businesses? Economic crises often hit small businesses hardest. Compared to large corporations, they have fewer resources and reserves, less purchasing power and less access to capital. As consumers rein in spending and banks tighten their lending models (both in the context of the recession), small business owners need to dig deeper and find smart, creative solutions.
Tips against the recession
With many experts predicting a relatively mild and short recession, here are some actions small business owners can take to position themselves in their strongest position and weather the storm:
Advertise your crisis products
You may have heard that during a recession, customers often buy relatively cheap things that make them happy. Determine what types of products your customers can buy (usually at a lower price) during a recession that also have good margins, and prepare to market them.
Keep your customers
Acquiring new customers is much more expensive than retaining existing customers. Your best customers are more likely to stay with you during a recession. Find out what they need from you in a burglary (ask them) and then provide it. You can consider special discounts on products or offers only for regular customers.
Pay attention to funding sources
Whether it's a credit card, bank loan, line of credit, or Small Business Administration loan, take steps now to ensure you have access to financing when you need it. Keep in mind that many funding sources can take months to reach. So it's best to plan ahead and consider the speed and flexibility you need.
Discover free or nonprofit resources for small businesses nationally or in your area.
Here is a list of 10 free small business resources from the US Chamber of Commerce. Your local chamber of commerce may have additional tools and programs.
Ask for help
The last is perhaps the most difficult for many small business owners who are very proud (and proud) of what they have built. Here's the truth. People really like helping people. Especially small business owners. Talk to someone who has relapsed. Learn from their mistakes and their knowledge. If you need anything, just ask. You have a whole community supporting you.
Small business owners have shown remarkable resilience over the past three years. I admire their resilience in the face of Covid-19, inflation, labor shortages etc. And I am confident that with the right planning, the right tools and the right support, they will be able to weather the upcoming downturn and emerge stronger.
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