8 Ways to Protect Your Business During Economic Uncertainty
January 5, 2022
Unforeseen recent circumstances have provided a stark reminder that markets and businesses are almost always vulnerable to some level of volatility. This uncertainty is the reason many business owners seek ways to continually protect their assets, their customers, their employees, and their businesses.
The truth is most businesses will need to navigate uncharted waters at some point. And while some turbulent waters might not be as choppy as others, they can have had serious impacts on business operations – impacts which can include all business areas. From supply chain disruption to inflation, geopolitical risks, and even health-related challenges on a local and/or global supply scale, it’s more important today than ever for businesses to protect themselves.
1. Downsize with Caution
When the books get tight and the profit margins tighten, a common knee-jerk reaction for many companies is to make cuts. Whether it’s cutting back on programs, services, products, or even employees, this can seem like an expedient way to stop the bleeding. Unfortunately, in most cases, it may be like putting a band-aid on a broken bone.
While payroll is undoubtedly the largest line item on the expense account, a lack of foresight can be a costly error. Moreover, the expense of training new employees, losing valuable assets, and the hit to company morale must all be considered. In many cases, cutting hours or reorganizing pay structures can be a more profitable, more cautious, and less costly move.
2. Value Customer Satisfaction
We all know it’s more expensive to acquire new customers than to keep old ones, and that’s an expense you can ill afford when the going gets tough. Keeping your current customers delighted and coming back for more is the best way to keep your cash flow up.
The value of customer loyalty is never more valuable or noticeable than when the economy turns. Satisfied customers are inclined to buy more when times are good and limit buying to their most trusted sources (customer loyalty) when the economy turns south. Business owners who put an emphasis on customer satisfaction will promote customer loyalty, and that pays dividends — especially when it matters most.
3. Supply Chain Management
One of the major events in the last few years that has helped to spur economic uncertainty all over the world has been the pandemic. And one of the most hard-hit aspects for many companies was the massive supply chain disruption and resulting crisis. That has highlighted the abilities of businesses and business owners to effectively use supply chain management techniques and tools.
From creative to temporary supply chain remedies and even global supply chain solutions, supply chain management skills have become a priority for many companies. Protecting businesses during economic uncertainty will sometimes require thinking outside of the box, and sometimes, it might mean staying the course.
4. Back to the Basics
Every business excels in certain areas. These are the services, the products, the skills, and the techniques that have helped them become successful and established. These are also the same principles that companies may want to fall back on during times of economic uncertainty.
An economic downturn is not the time to diversify, put money into R&D, or try to expand into new markets. Drop the extras and put that energy into the services, products, or ventures that have proven most profitable. Focusing on core elements that a business has historically done well with generally translates into more revenue and improved profits during any type of economic uncertainty or downturn.
5. Benefiting from the Labor Market
The expense of payroll has already been stated. For many businesses, however, production is key to success, and unless the company is a sole proprietorship, that requires employees. Many businesses can take advantage of a strong labor market during times of economic uncertainty as the unemployment numbers remain elevated.
As the U.S. economy begins to recover, many people are still trying to get their footing and get back into the workforce. This is an ideal situation for businesses that need good employees, and it also permits employers to be a bit more selective, too.
6. Balancing Customer Growth and Retention
Although it’s the satisfied, loyal customers that businesses rely on during tougher economic periods, that doesn’t mean pursuing prospects and new customers should be forgotten. Continuing to develop the company brand and staying relevant and seen can have rewarding benefits both now and later.
In addition to new customers that might be the result of even scaled back marketing efforts during economic uncertainty, companies will also be well-positioned for when the economy strengthens and stabilizes. The number of companies that have gone out of business in the past two years has been well-documented. And when the economy recovers, where will those customers go?
7. Keep One Eye on Your Credit Scores
Although most businesses should be pulling back on any unnecessary expenditures during times of economic uncertainty, a strong credit score is still worth having, and perhaps even more so. No company wants to need credit, but during the most difficult economic situations, sometimes companies need credit to stay afloat.
Maintaining credit scores and ensuring that the company’s credit rating is monitored regularly can be a lifesaver. It can also be a company-saver during hard economic periods as well as an important way business owners can keep businesses protected.
8. Business Insurance
Your business is your lifeblood — it’s your passion and the reason you get out of bed in the morning. There are times, however, when facing the day is more challenging. Customers rely on businesses to be there and to meet their needs. Suppliers, manufacturers, and distributors all work together and depend on each other. Employees look to their employers for security and income, but who do businesses and business owners turn to when they need help?
At First Western Trust Bank, we take a unique, tailored approach to each and every one of our clients. We take a deep dive into every aspect of your income, liabilities, goals, and values to create a financial plan that will help you weather the storm and emerge stronger than ever. Let us provide the kind of customized service you can count on — in good times and bad.