3 reasons small businesses may struggle in 2023 and how to prepare

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Anyone who says they can predict their financial future may be fooling themselves.

Key Point

• The key to weathering inflation or a potential recession is basically the same.
• Planning for an economic downturn is the best way to keep your business alive.
• Creating the ideal workplace may not be easy, but it is sure to attract and retain the best applicants.

We all know by now that doom and gloom sell. Fear pushes people to delve deeper into the subject. But we won’t do that here. The truth is, no one knows what will happen in 2023, no matter what anyone says. What if it’s great? What if the economy took off and small businesses thrived? If any of us knew how to predict the future, we wouldn’t lose the bet.

Instead, small businesses May We will struggle in 2023. More importantly, consider the steps you can take to prepare for road bumps. And if those bumps don’t show up, great. It is never a bad idea to put safeguards in place, no matter how optimistic or dire the forecast.

1. Possible recession

While we’ve managed to survive the worst of the pandemic in the shortest recession in history, there are so many people out there screaming the word ‘recession’ from rooftops to sell ads. mosquito? They will get it right at some point. The problem is that we have no way of knowing when that will be.

Recessions are a natural and expected part of the economic cycle. Things are heating up and the Federal Reserve has to raise interest rates to keep it in check. A global pandemic hits and the economy is in chaos. You know a recession can happen, so do what you can now to prepare. There are several ways to do this.

Manage cash flow

According to US Bank research, 82% of business failures can be attributed to cash flow mismanagement. So follow up on overdue invoices before financial problems arise. If you don’t already have one, create a labor contract that includes late fees. It won’t help with invoices that are already overdue, but it may help you avoid future problems.

Another way to reduce the risk of non-payment is to collect upfront deposits for high-paying jobs. Customers who have paid a deposit are much less likely to skip the final payment.

We understand the need to maintain trust with our customers, but that trust must be built on mutual respect. You give your customers what they need and they do their part by paying them in a timely manner.

If possible, put some of the money you collect into an emergency savings account. That way, if your furnace breaks or your business temporarily slows down, you don’t have to panic.

cut the fat

Take a close look at your monthly expenses. Are there any costs that can be reduced? That means buying from different vendors to get better prices, isolating stores to reduce utility bills, and reducing monthly credit card payments to avoid paying interest. There are cases.

If you have employees, ask them to help identify where you can cut back. They may notice something you overlooked. In addition, asking for opinions can remind you how much you value your employees’ opinions.

secure funding

If you’re worried your business won’t survive the recession, open a business line of credit while things are going well. The money is there when you need to access it. Otherwise, you have one less payment to pay back.

read more: best business credit card

be creative

Brainstorm ways to grow your business. It could be as simple as sponsoring your local Little League team, running new ads, or partnering with other businesses to promote each other.

2. Inflation

Knowing that there is little you can do to control inflation is a feeling of helplessness. It also causes you to worry about your business’ viability.

It’s never fun for the Federal Reserve to raise the prime rate (the rate banks pay to borrow money from each other), but it helps to understand that it’s being done on purpose.

The Federal Reserve hikes rates because it’s growing too fast to slow down an unsustainable economy. Low interest rates increase the price of goods and services. The reason the Federal Reserve raises rates slowly and systematically is to slowly bring prices back to where they were.

See the tips above if you’re worried you won’t be able to weather inflation until it’s under control. I can see you

3. Hiring Bears

If hiring in 2023 is going to be a problem, it’s definitely because of the competition. Here are some tips for differentiating your business.

• Provides flexibility: Allow employees to work remotely if they wish. If you need a day off every Tuesday to take your child to physical therapy, find a way to make it happen. Flexibility doesn’t just make life easier for your employees. It also tells them that you love them so much that you give in.
• Burn value into your business: People want to work where they know they are safe and treated with respect. Make it clear to all employees (including future employees) that your company values ​​kindness. They are not allowed to talk about each other behind their backs. You see them as an asset, so let them know that they will always have your respect.
• Offer fair rewards: Gone are the days when business owners could choose their talent pool by paying the lowest price. Research how much each position pays on the open market and try to match (at least) that amount. If the bank doesn’t have the funds to provide a fair salary, it means it’s not ready to take on new employees.

The easiest way to get past a rough patch is to prepare for it. And remember, forecasters aren’t always right. 2023 could be the best year for you.