Looking back, we all deserve much more credit than we give ourselves for everything that we’ve endured these past few years. Then when it feels like we were finally emerging from the pandemic, things take a turn yet again. In some ways however, having made it through the past three years, small business owners are more motivated than ever to push forward and have their businesses succeed even with these additional unforeseen economic challenges emerging.
In terms of what’s next for small businesses, there are a lot of unknowns. But that doesn’t mean it’s all about having a bleak outlook. Ultimately, remaining informed and doing your best to plan is your strongest tool during uncertain times.
Let’s look at some of the current challenges facing small business owners and what can be done to help mitigate them.
1. Inflation – Finding the Right Balance
With raw material prices rising (dominated by supply chain issues), inflation is passed along, first to merchants, and then to consumers. For small businesses, when it comes to this particular challenge, the question is how do you balance your own rising costs with then either shrinking profit margins or having to raise your own prices?
So with the lingering question of how to overcome inflation, the reality is, there is no right answer, but likely the “best” solution involves a balance. Depending on the industry your business operates in, this is also a factor in who takes on either the cut in margin or increase in price.
Most customers, although not pleased, would likely not be surprised by your prices increasing, as this has become a regular occurrence in most aspects of life. Transparency is your best option. Show the human side of your business by explaining upfront that you are increasing your prices and the reason why. When it comes to maintaining a balance, consider the negative impact of dramatically increasing your prices that would then mean losing clients, in comparison with a manageable decrease in your margins. Today’s hope is that increased pricing is temporary – nothing wrong with sharing that view!
Now more than ever, it’s crucial that you understand your numbers. Take a long look at all of your operational costs as well as your revenues. If there are unnecessary expenses or luxury expenses that you can go without, now is the time to cut them. When margins are stretched thin, any additional savings goes a lot further.
2. Supply Chain – Planning Ahead and Adjusting With the Seasons
When faced with potential lengthy delays and dissatisfied customers, there are two factors to consider: plan ahead as much as possible and realize that there is only so much you can do which means that delays may still happen.
You know your business best, including your typical seasonal fluctuations, so that should be the major factor when planning ahead. It’s a tricky balance to not have too much inventory using up working capital (given its rising cost) and having enough inventory to meet demand.
The reality is, whatever your typical advance order framework is, you need to add more time to that to account for delays. Have an open conversation with your suppliers to help you make the most informed decision about how much and when to purchase.
Plus one potential benefit of buying in larger quantities is that you may be able to negotiate a better rate with your suppliers given the higher purchase value, meaning a small addition for your overall input costs notwithstanding an increase in working capital employed.
3. Rising Interest Rates – Consider Additional Options
For small businesses, rising interest rates inflating higher than we have seen in the last three decades, has had a major impact on small businesses’ and their ability to access capital. Not only will this mean that rates will be higher, but businesses could also face longer delays and stricter parameters from traditional lenders. Accordingly, with slimmer margins, the ability to repay also becomes more difficult. With access to capital vital for continued function and growth, some may find themselves at a cash flow stalemate. Again, properly assessing your business’s cash flow forecast is one thing you need to do.
When it comes to helping small businesses being able to get the necessary financing to both run and grow their businesses, alternative lending remains a tool for accessing capital.
4. The Pandemic – Lessons Learned
For some, pre-pandemic times feels like a lifetime ago, and for others the pandemic itself is something that they would like to leave behind and not think about again. But the effect of the pandemic on small business has been undeniable. While things are certainly better than they were during the height of lockdowns, and many aspects of life back to normal or rather the “new normal”, there are still factors to consider.
Although mask mandates have been lifted, and many are vaccinated, this does not completely eliminate the potential risk of getting sick. Whether it relates to one of your team members or your customers, it’s best to have a plan in place ahead of time.
While being down a single team member may not be a problem, if a large number of your staff are all sick this would certainly be problematic. Have an open conversation about what staff should do if they feel unwell either before or during their work day. If possible, in addition to regular paid sick leave, account for extra covid-specific sick days. If employees are concerned about losing money by calling in sick, they will be less likely to do so, putting the rest of your team at a higher risk.
When it comes to your customers, in particular if they are paying for a service that requires them to be in close contact with your team for an extended period of time, do what you can to be flexible and offer to reschedule. A single job is likely not worth potentially compromising multiple ones afterwards due to staff illness.
Although this is a route that none of us would like to consider, the best option for small businesses is to always have a plan for the worst, and in the meanwhile make the most of the present circumstances. As they say, hindsight is 20/20, so what would you do differently if faced with a similar turn of events?
Having been through past shutdowns and everything that has meant for your business, consider what you can plan for, and what you might do differently. Is there a way for your business to pivot if you have to temporarily close your physical location. Is there an additional product or service that you can offer? Given that it was such a shock to all of us the first time around, having a safety net should be a reminder of a not too distant past.
5. Mental Health and Burnout – The Silent Threat
Having discussed many challenges and heavy topics, it’s essential to also take a hard look in the mirror and assess how you, as an individual, are doing. The mental health of small business owners is often downplayed compared to other challenges. Being a small business owner is stressful under normal circumstances, but with the added uncertainty of global health, the economy, and many other factors that we have no control over, it’s a lot for any individual to shoulder.
Planning for all of the scenarios mentioned above, plus any others that you can think of that could potentially impact your business is the number one place to start. The reality is that you can’t account for everything, but hopefully some of that failsafe “just in case” planning will help you out.
Although it can be hard to delegate, building a support system both within your business and outside of work helps with the burden on the workload itself, as well as general life stressors. If you’ve hired employees, then you should be able to trust them to help you take on some of the tasks of running your business. It can be a challenge to let go, but no single individual can do everything on their own. Additionally there are many forums and online communities where small business owners can discuss and work through common challenges, finding solutions and other ways to support each other.
When it comes to support outside of work, talking with friends and family, who are completely separate from your business’s day-to-day operations can provide an unbiased sounding board to help you work through some of your challenges and brainstorm solutions. If even for just a few hours in a week, find some type of balance between work, your regular everyday life, and some sort of activity or hobby that is just for you. Whether it’s exercising, spending time outdoors, or doing something else that you enjoy, that helps temporarily take your mind off your work-related stress.
Focus on What You Can Control
While the challenges facing small businesses in Canada can feel overwhelming, the overarching theme is that it’s crucial to remember that there are factors you can control and plan for, but others that you can’t. When things are more expensive those costs need to be absorbed somewhere, so it’s about balancing how much of that you as a business owner can take on while still remaining profitable, and also not pricing out your buyers. Given the surge of new businesses opened during the pandemic, the future of small business, although filled with its challenges, continues to be a bright one.