Expecting the unexpected is the norm for businesses today. From workforce challenges, inflation, and increased production time to unpredictable interest rates, planning for the future means more than just working toward a single goal.
Businesses today need to be ready to effectively change course to successfully navigate new challenges or opportunities as they arise. Our Chief Commercial Banking Officer, Jim Rizzo, has seen the importance of selectively pivoting to keep your business on track as the market shifts.
Whether you’re building your first business plan or you're creating your plan for the new year, here are four strategies Jim recommends that business owners keep in mind to ensure survival during the unexpected.
“The most important thing we have is the human element of business. Pay close attention to your people; everyone is under pressure. Empathy goes a long way,” said Jim. “Good people are hard to acquire and even harder to keep.”
The cost of human capital today (i.e., employees) continues to rise, and the process of hiring and retaining great staff is exhausting and time-consuming. If you’re hiring someone for a job with a $100,000 per year salary, you could spend upward of $150,000 in time and real dollars to fill that role.
To retain top talent, be mindful of what you’re asking of your staff, and work to reduce or eliminate inefficiencies. Fix the processes that aren’t working to your benefit and make internal processes as efficient as possible.
Best Tips for Recruiting and Hiring Top Talent in a Competitive Labor Market
And when it comes to clients, remember they are people, too. Communicating regularly is crucial. How can you help them? How can you deliver an exceptional experience, and establish a trusted and valuable relationship with them?
Jim says, "Take the time to understand their business. Be willing to get in the weeds and help them to anticipate their next challenge. When it comes to serving family businesses, a deep and trusted relationship is the only way to reach an understanding of the family dynamic that drives succession planning.”
Whether you’re planning for a higher interest rate environment that extends over time, or you’re exploring the introduction of a new product or service to the market, forecasting your business needs is a critical part of business risk management.
Start by taking the time to dig into your numbers and get clear and realistic about where you are and where you want to be. This requires complete honesty with your forecasting.
“Have a clear understanding of your break-even point under multiple scenarios, be it revenue or margin compression or a combination of both,” said Jim, “and then have plans to manage those scenarios.”
This includes understanding how much cash is needed on hand to cover immediate expenses, and how much is needed to support working capital.
No one has a crystal ball, so our best advice is to be ready – plan for the unexpected. The best way to plan for the unexpected is to actively manage your liquidity and working capital. Commit to smart forecasting and be prepared to adjust in real-time, as needed.
It’s critical to actively manage the collection of receivables as well as monitor inventory purchases. Working capital management, though always an important part of successfully running your business, is more important than ever as inflation and interest rates continue to be volatile.
Tips to Inflation-proof Your Business
Remember: The availability of cash will ultimately determine if your business can keep operating.
When you’re buying a new piece of equipment, ask yourself if it’s the best option. Is renting or leasing another viable option to explore? If you opt to buy, do you have sufficient throughput to make an acceptable investment return?
This is also relevant to companies working in the service industry. Before you take on that big new client, truly understand the associated profit margins. Are they sufficient for the risk? Are they sufficient to invest in the working capital to support that new client?
Be mindful of the details associated with each of your costs, and be honest with yourself if the opportunity and appetite for the risk match.
Before making any business investments, consider engaging with your commercial lending partner. Vetting the opportunity early with your lender can ensure that you are supported throughout the entire process. Your lender has resources that may help to find solutions to challenges and help mitigate risk.
Learn more about how to effectively manage your business through a changing economy.
Get the latest financial tips and advice by signing up to receive our emails.
Rockland Trust Online Banking gives you a variety of services that help you use and manage your accounts, whenever and wherever you want.
* indicates a required field.
Rockland Trust makes it easy to manage all of your accounts with our simple online portals.
Rockland Trust gives you a variety of services that help you use and manage your accounts, whenever and wherever you want.
* indicates a required field.
