This article was written by Warren Banks. Warren has decades of international business experience and currently works as a Global Trade Center business advisor and co-facilitator of the Buying and Selling Outside the U.S. training program.
Many businesses are currently concerned over rising costs of nearly everything. Those that are exporting or importing are looking at transportation costs (sea, air and land) that went up substantially during the high incidences of COVID-19. Some firms, perhaps many, are still experiencing high transportation costs. However, some companies have asked for bids from transportation providers, other than their current providers, and found that the bids they received were significantly less than their current costs. If your business has not checked on current pricing of transportation, perhaps you should.
The foregoing is but one example of routinely checking your company costs and not assuming that when costs of your supplier come down savings will automatically be passed on.
Questions and Strategies to Help You Prepare
Is your company prepared for a potential recession? In an uncertain economic environment, does your company have a plan for potential slowing sales?
Recessions—defined as two consecutive quarters of negative economic growth—can be caused by economic shocks (such as a spike in oil prices), financial panics (like the one that preceded the Great Recession), rapid changes in economic expectations or some combination of the three. Most firms suffer during a recession, primarily because demand (and revenue) falls and uncertainty about the future increases. But there are some strategic ways to mitigate the damage.
There are several ways to prepare. First among them is to reduce debt as much as possible. One way to do this is to reduce payments on term debt by stretching the debt out if possible. Reduce other costs, without laying off employees. Maybe some employees can reduce the number of days per week, and, if necessary, work elsewhere to make up for those days. Or consider reducing hours worked for hourly employees. Can technology supplement some of your employees’ tasks?
And remember, if the U.S. does have a recession, it is more than likely that other countries will as well. This means that buyers of goods or services in other countries may prioritize what they will buy. Will your company product or service survive the cut? And if you are importing, how will your supplier be affected? Consider looking at how their delivery has been over the past three years. Might the COVID-19-affected supply chain be an indication, particularly after deliveries became delayed at entry and from entry to your firm? How did your supplier react to this situation? Is your supplier in good financial shape now?
In addition, make sure you are aware of current and coming fluctuations in the value of the U.S. dollar. For example, as the value of the U.S. dollar weakens, exports could be cheaper to buyers (depending on where the buyer is located) and imports may become more expensive.
Finding Time to Prepare
It is difficult to find time to think about these issues (among many others), when the daily and weekly decisions demanded by the closely held small business take up thinking time. However, it necessary to take a few hours to think and plan for coming economic shifts so that your business can continue to thrive.