What will 2023 bring for business?
WHAT WILL 2023 BRING FOR BUSINESS?
No one knows, but here are a few things to consider to ensure your business thrives this year. Tony Alexander’s blog A Recession Session, gave a really good overview of what a recession is. You can read the full article here.
To save you time, here are a few key points that, as business owners, are really helpful to know.
The opening paragraph of Tony’s article sums it up really well. “What does it mean if our economy goes into recession? Three things. First, the level of output will shrink. Second, most people will notice nothing at all. Third; many people will be better off”.
The view that a recession is a disaster for everyone is what we have been brought up with and what the media has been telling us as well. But it isn’t. They are necessary as part of the cleansing process. Yes, there will be businesses that fail; they tend to be the ones that were on shaky ground to start off with. We saw this during the Pandemic as well.
These shaky businesses will take drastic action to remain solvent, and one way to do that is to cut spending. Laying off staff, slowing down paying their bills, putting plans on hold.
The flow-on effect of this, if these businesses are your clients, is it can slow your cash flow down, which leads you to have to slow down as well. Things can then snowball, with the banks cutting back on lending when firms need it the most; in other words, the rainy day has come, and the umbrella is nowhere to be found.
Businesses become more cautious; worry grows in the community about losing jobs. So consumers cut their spending as well. The first areas to feel the effects are ‘durable’ goods, cars, couches, electronics etc. Then big things like new houses and construction slows down, which can lead to business failure.
This doesn’t sound good, and of course, leads to the question of how this process stops?
There are a few steps in the process, and you can read the details of these in Tony’s article, but basically, a recession causes the rate of inflation to fall away. Interest on deposits will start to fall again so people with money in the bank will decide to start spending.
Businesses headed into the recession in a strong position can pick up business assets that didn’t make it through. There will be good deals around for leased premises, and the availability of well-motivated staff will increase as well.
Lower interest rates will also aid the recovery of consumers who start to spend and return to buying houses. And the cycle begins all over again.
Now that you better understand what a recession is, what can you do as a business owner to be on the thrive side of the ledger? Here are my top 5 tips for you…
1. Be Optimistic, but also be realistic. Don’t stop planning and looking towards the future; be very aware of your worst-case scenario and have a plan B.
2. Cash is King. If you haven’t got cash reserves, start building them up now. Be very clear on the difference between Profit and Cashflow.
3. Continue to market your business so customers can find you. If customers have money to spend, you want them to spend it with you!
4. Keep your sales activity going, upskill your sales team, or if that’s you, upskill yourself to be effective in the new market conditions. Keep your pipeline open.
5. Look after the top performers in your team. It costs more and takes longer to train a new staff member than it does to keep your best staff with you. Don’t let the bottom performers push your top performers out the door!
If you are finding this all a bit hard or want to double-check that your business is in the best place for the coming recession, send me an email, and I can help. I’ll put my accounting hat on and my money mentalist hat too. Both hats plus you are a powerful combo!