Two years ago, in the midst of global pandemic, financial analysts predicted 2023 as a time for financial recovery. But rising inflation, unreliable supply chains, months of major tech layoffs, and potential for financial recession have small business owners forecasting their economic future with some anxiety.
As a business owner or entrepreneur considering the year ahead, what tips and predictions should you know when starting or scaling your company?
Capital: What funding is available for small business?
But is funding available?
Ashley Tyrner, founder and CEO of FarmboxRx, predicts that “gaining funding will be incredibly difficult the next 12 to 18 months.” Raj Tulshan, founder of Loan Mantra, goes one step further. “An uneven market means business owners will have to absorb the financial shock into their own cash flows.” This is especially challenging, Tulshan continues, “after two years of relatively ‘cheap’ money was available during the pandemic.”
However, there are ways to streamline costs and “absorb” the financial shock during a recession. Here are some tips:
- Establish your baseline: An accurate view of your financials allows smart business owners to account for every cent they make and spend. What can you live without? Can you forego an equipment purchase for nine months in order to survive interest rate hikes? When you know what is vital for your daily operations, you can establish a strong baseline to valuate your financials.
- Leverage (Fin)Tech: Business owners often debate whether staff cuts will serve their bottom line during lean times. But few consider how technology can help cut costs and grow savings. Using an end-to-end financial technology allows business owners to stay current with their financial documents and to collaborate with their financial providers.
According to Tulshan, good financial technology should help business owners save time and money. It “provides ongoing benefits to the borrower, offering them measurable savings in time and money and painless access to capital throughout the life of their business.” Rob Daniel, a director of products at Intuit, says, “faster access to money provides more opportunities to invest in growth.” Furthermore, if a business owner is leveraging financial technology, they are more likely to have quick access to their projections and financial partners who can help them.
Core: What are your strengths as a business owner?
What comes up, must come down. Financial growth like the U.S. experienced since 2020 has allowed new companies, entrepreneurs, and investments to enter and oversaturate the market. But this year requires a more streamlined approach. Smart business owners will recognize a market downturn as an opportunity to distinguish oneself from their competition.
In short, it’s time to ask yourself what your core strengths are as a small business. Are you relying on those basic strengths to outperform your competitors?
Here are some ways to use your core competencies to your advantage:
- Demonstrate durable value: Some industries are more impacted by a recession (e.g. retail, restaurants, travel and tourism, leisure and hospitality, real estate, and warehouse). Yet the majority of consumers will remain loyal to companies in leaner times if they have proof of the long-term value of a product or service. Customers value consistency and reliability. It’s up to you to be both.
- Be basic: Are you currently offering products or services that are nice, but unnecessary? Can you strip or consolidate your offerings without diluting your brand? For instance, one restaurant owner determined her beverage costs were higher than her sales. She revamped her drink menu to include only high-selling customer favorites. She stripped drinks and cocktail ingredients that were cutting into her bottom line and absorbed savings into other areas of her business.
Community: Are you fostering growth?
The small business and entrepreneurial landscape has changed tremendously over the last decade, and especially since the pandemic. In an era of hybrid and remote culture, one of the most important places for a small business owner to create community is in their offices and headquarters.
In the wake of social media and fast-moving messaging, employees are excellent brand ambassadors or strong whistleblowers to organizational and personnel challenges. Fostering a positive and professional culture is a crucial first step in brand trust. Now, when layoffs and financial challenges can cause internal distrust, business owners must do their best to shore up healthy culture.
Next, successful business owners will gain market share when they genuinely engage with consumers.
How do you do this?
- Share your mission: 52% of Gen Z buyers base their buying decisions on a company’s mission and impact alone, up from 33% of Millenials. Furthermore, employees who work for a mission-driven company are 54 percent more likely to stay for five years.
- See your customer: Businesses rely on the loyalty of their clients. And small businesses have a leg up when it comes to connecting with their customer. Bigger brands enjoy larger budgets and exposure, but they can’t offer the personalized customer experience that a small business can. By understanding your customer’s pain points and goals, you cultivate an integral and ongoing role in your community.
“Once a customer walks into a cafe, gas station, salon, or even an accountant’s office and feels they are among friends, that business has embedded itself into the community,” says Raj Tulshan. He continues, “These are brands that set themselves up for a lifetime of success.”
Small business owners identify two obstacles to their success: access to capital and financial education. Loan Mantra removes these hurdles. Our end-to-end, bankable platform allows borrowers to find the right financial products and lenders. Parties collaborate in real time, so loans originate, fund, and service with ease and efficiency.
Loan Mantra improves the future of human entrepreneurship through best-in-class technology, financial literacy, and commitment to equitable market access. Want to recession-proof your business? Get in touch today.