The economy affects everyone. There is the global economy, national economies, regional economies and local economies. Our supply chains reach many corners of the world which amplifies the global economy and has lasting effects all the way down to local economies. In short, if you are someone who makes any sort of purchase, or sells anything, you are part of the economy.
Small businesses in US economy
The United States has 32.5 million small businesses as of 2021, which created 61.2 million employees. Small businesses are the backbone of the US economy, and create two thirds of jobs, as well as account for 44% of the economic activity, according to SBA.gov. This means small businesses are essential to the US economy and provide value not only to their customers and clients, but to their employees and communities.
Market Predictions
Even though the current 2023 market predictions point to economic uncertainty and a possible recession, there are ways small businesses can still find success with rising costs of goods and services.
“Global economic activity is experiencing a sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.” according to the International Monetary Fund.
A recession is a business cycle contraction when there is a general decline in economic activity. This means less spending and fewer sales. Small businesses are most likely to be impacted so adjustments will need to be made. Industries that are most affected by recessions are retail, restaurants and bars, hospitality and real estate, and those least affected by recessions include grocery stores, discount retailers, alcohol beverage manufacturing, consumer staples (household items and things like toothpaste and toilet paper), and cosmetics.
However, recessions (or downturns) are not forever and businesses can find innovative ways to set themselves up for success. Whether that is reducing the variety of goods you sell to help stabilize costs, or raising prices to cover higher expenses or overhead, this article will provide tips during economic uncertainty and recovery.
Tips to prepare your business for 2023
- Saving money
- Evaluate the costs in your business
- Focusing on your most profitable aspects of your business
- Stay on top of your receivables
- Improving customer service
- Increasing business referrals
- Becoming more active on social media
- Creating a Positive Environment for Employees
Saving Money
Whenever there is economic uncertainty, it is wise to save as much as you can. Having a reserve of cash can be helpful if your business slows down, or you have a large unexpected expense, like replacing important equipment that breaks.
Evaluating the Costs in Your Business
It’s important to look at where and how often you are spending money within your business. Look through your financial reports to see where you are spending unnecessary money, and where you could cut costs. Are there more affordable alternatives to some of your equipment and supplies? Try making the swap to save money.
Focusing on the Most Profitable Aspects of your Business
Identify the areas of your business that generate the largest profit. Evaluate your business to see if there are products or services that aren’t as profitable, and require a lot of work. Can you focus solely on the areas of your business that have the highest return? By doing this, you’re optimizing your businesses’ time and resources.
Staying on Top of Your Receivables
Receivables are the amount of money owed to a business. If you are invoicing clients, be sure that they are paying you, and doing so in a timely manner. Use an accounting tool to track whether they have paid or not, and if you need to follow up with them.
Improving Customer Service
Consumers hold a lot of power in regards to where they spend their money. When we face economic uncertainty, many people will be selective where they spend their money. In order to retain customers, focus on your customer service so they feel like what they are purchasing is worth it. Build customer loyalty by creating a memorable (positive!) experience.
Increasing Business Referrals
An easy way to get new clients or customers without investing in marketing is through business referrals. A business referral is when someone suggests to another person to hire you or to shop at your business. Referrals happen organically when someone has a good experience with your business and they tell someone else about it; however, there are other ways you can create referral opportunities. Give your customers a discount, or incentive when they refer someone to your business. For example, let them know that if they refer someone to your hair salon and that person mentions their name, they will receive 15% off their next service. Online reviews are another example of referrals, so encourage your customers to leave positive reviews.
Becoming More Active on Social Media
This is a free and easy way you can reach a bigger audience and connect with your customers and community. Social media is a great way to advertise if you’re running any specials, what you are offering, and other important business information. Read our article “Social Media for Business: What You Need to Know.”
Creating a Positive Environment for Employees
Some people may be feeling the stress of economic struggles, whether your employees are working more hours, or they are working multiple jobs, it’s important to focus on keeping a positive environment. Boosting employee morale increases productivity and creates a positive environment for your customers. Not only that, there is a cost of hiring and training a new employee.
You got this
While economic uncertainty isn’t ideal for small businesses, there’s still room for positivity. Your business can still grow if you stay on top of your finances, create and stick to a budget for your business, become customer and employee focused, stay connected to your community, take opportunities to advertise on social media, and encourage referrals. Additionally, there is the option to apply for a small business loan, as well as follow our resources.