Small businesses are resilient, and resilience is especially important in challenging times such as these. This type of strength and agility relies, in part, on good business instincts. But it also depends on a clear understanding of the measures that may impact results.
Know The Context
It's important to consider data in the context of what your business does and where it is located. For example, the unemployment rate for a business located in an area that is experiencing a lot of growth means something different from what it does for an area that is experiencing a reduction in its population. Places with growth will have more people spending more money on a variety of goods and services. Areas that are stagnant are likely losing businesses as people are spending less and less.
The same is true for other data. Supply chain disruptions will be harder to deal with for small businesses than they will be for large companies because bigger businesses have the resources to pay for faster deliveries. Some business and service providers can get a snapshot of what is happening by looking at information specific to their industries.
Keep in mind that statistics have a subtext that may not be easily apparent. For example, are multisite businesses reporting their data for each location, or is it all on an aggregate basis? Questions like these are why it is important to put this information into a context that is meaningful to your business.
One way to do this is to think about the information in the framework of a SWOT analysis — strengths, weaknesses, opportunities, and threats — for your service or industry. Then look at the analysis again through the filter of what is happening in your specific market. Doing so will allow you to have a clearer picture of your needs and where resources should be allocated.
Along with the other financial concerns that small businesses are facing, inflation has become a major factor. Predictions differ when it comes to how long the current inflationary cycle will last. Consequently, business owners need to assess how they will be affected by the higher cost of money in both the short term and the long run.
Taking these three steps can help:
- Budgeting: Cut costs — but in a thoughtful way. This should be your strategy when making any major purchases, from software to a new hire or anything in between. Understand what you really need as well as the costs of any bells and whistles. Maybe it is best to start with the basics now and then add on to your list of purchases as needed when your budget allows for it. For example, does it make more sense for your business to hire a freelancer who can maintain your company's social media platforms, or is a full-time employee what you need instead? Writing out a job description and then comparing the costs of hiring each type of person should help you figure out the answer.
- Margins: Take a long, hard look at your margins. How much is every sale costing you? Is there a way to use new manufacturing methods or sales channels so that you can increase your margins?
- Financing: If you need help with financing, turn to government sources first. Low-cost funding may be available, for example, if your business is located in an economic development zone.
Putting the information that you gather into a meaningful context and following through on that consensus will help ensure that you are keeping a perspective that makes sense for your small business.
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