Driving success through the pandemic: Small business preparedness is key
With Popular Bank Chief Operating Officer Manuel Chinea
Earlier this year, we joined Latin Biz Today to record a series of webinars focused on helping small businesses navigate the uncertainty and the unique challenges of operating during a pandemic. Previous discussions included emergency funding and liquidity, small business agility and navigating success amid disruption. As we head into the final months of 2021, we take a closer look at the recent economic expansion, its opportunities, challenges, and the importance of small business preparedness.
Inflationary pressure, rising costs, and staffing shortages are here.
In the past 12 months, we’ve seen the U.S. economy, fueled by the federal stimulus programs, undergo a rapid recovery and expansion after the COVID-19 crisis. However, as the economy goes into overdrive – or overheats — we’ll likely see inflationary pressure and a different set of challenges for the small business sector. Federal Reserve has already indicated that they may raise interest rates next year, letting us know that the fiscal support programs will soon be a thing of the pandemic past.
Post-COVID economic recovery has led to a number of challenges that have been especially difficult for the small business sector. From the rising costs in raw materials, goods, and construction services to wage pressures and staffing shortages.
To continue to grow your business in the unknown inflation environment, it is important to plan for effective capital deployment and to react dynamically as activities unfold to ensure your financial health. That is especially true for small businesses as they are often more vulnerable to economic fluctuations.
Understand your business needs and plan, plan, plan.
Small business preparedness includes understanding your needs and priorities, assessing customer behavior, and developing scenario planning for the next six months. The following two components can serve as a good starting point:
1. Protecting your key talent.
Labor shortages and wage pressure continue to be an area of particular importance. Over the past 18 months, people have taken time out to reflect on their work-life balance and quality of life. With an overheated economy, more professional opportunities have opened up as well, prompting an era of “great resignation.”
Loss of key talent disproportionately impacts small business owners compared to larger businesses. Now is the time to be proactive by reassessing compensation and work environments since key talent may become “curious” about other opportunities if their current employer hasn’t bolstered offerings or incentives. While these efforts may cost more now, they will ensure business continuity in the future and be a fraction of the cost compared to the risk of losing revenue or key talent. Small businesses often struggle to find hires of similar quality or personality fit, and in the process, lose long-term business sustainability. If you are going through a higher-than-normal turnover, it is important to try to ease any anxiety or uncertainty of your existing employees.
On the other hand, there’s a new openness that can be a benefit to small businesses. If they are in growth mode, small businesses have an opportunity to add key talent. Doubling down on current talent allows a small business to a be proactive in securing additional hires. Again, communicating the viability of your business is critically important if you are expanding as well.
2. Approaching opportunity creatively.
The pandemic has forced us to redefine the idea of a workspace for the near future. With ongoing delays in returning to the office, companies are renegotiating rent contacts and rethinking their footprint. It is a good idea for small businesses to review their cost infrastructure and occupancy. What is the most efficient footprint for your strategy? Do you need to have a physical office presence everywhere you are now? Does working remotely or partially remotely expands your potential customer and talent pool? Or have you outgrown your current space and are ready for expansion? Now is the time to make that assessment.
Consider the health of your balance sheet as you rethink workspaces, make real estate decisions and evaluate your financing needs. If you are looking to expand your physical locations or space and are facing a rise in construction costs and raw materials, those supply shortages are slowly coming to an end. Spending has gotten more aggressive, and the supply chain is trying to catch up with demand. If your small business has a plan, you have identified market opportunities and have a healthy balance sheet, securing low-cost financing to expand is still optimal.
As the economy slowly returns to its cyclical nature and speed, planning and preparedness will continue to play a critical role in the health of your business and your growth strategy. Small businesses shouldn’t be afraid. Given the continued economic growth, now is a good time to grow, if you’re ready.