Rising interest rates and inflation can have a significant impact on small businesses; in fact, in a survey from Goldman Sachs 10,000 Small Businesses Voices, 61% of respondents reported a negative effect on their business from increased interest rates. Fortunately, that assessment didn’t mar their overall outlook, as 68% reported feeling optimistic about the financial trajectory of their business in 2023.
Yet as economic clouds gather, small businesses need to build their resiliency by creating a proactive risk management plan that can help weather any storm. Here are five areas to focus on:
1. Be proactive with: your finances
Small businesses need to be especially vigilant about their finances during economic uncertainty so now is a good time to identify ways to economize or seek additional financing.
- Talk to your business banker about options for advantageous products and services. You might benefit from a credit card that offers cash back or a business checking account that streamlines your procedures.
- Monitor your cash flow and identify ways to cut costs. Check for recurring charges such as subscriptions you no longer need. Call service providers like your internet or insurance provider to request a rate adjustment.
- Look into establishing a business line of credit as a safety net for unexpected circumstances. The beauty of this financing option is that you only pay interest on the amount you tap, rather than the entire approved amount.
2. Be proactive with: your revenue streams
With a potential downturn looming, you never know when and where customers might make cuts. Diverse offerings can help retain them.
- Offer new, innovative products or services. Talk to your customers about what would resonate with them; just make sure they complement what you already offer so your marketing can be seamless.
- Create recurring revenue through subscriptions if appropriate to your business model. Being certain you can rely on a steady monthly stream of income helps stabilize your cash flow.
- Collaborate with other complementary businesses. Identify cross-marketing opportunities. A fitness studio and juice bar could offer discounts to each other’s customers or an event planner and a caterer could share referrals.
3. Be proactive with: your pricing
Your customers are watching their wallets and are increasingly price conscious. Yet cutting prices across the board can eat into profits when you need them the most. Here are some other ways you can maintain your value proposition while still addressing economic realities.
- Highlight the unique benefits you offer. Do you offer faster response time or door-to-door delivery? Many customers are willing to pay more for increased convenience.
- Offer a wide range of items across various price points and position them as “small indulgences.” A recent Deloitte survey found that 77% of consumers were willing to splurge on themselves, even if they didn’t feel their budget supported it.
- Offer rewards for referrals or through a loyalty program. Choose your benefits judiciously so they don’t cut into margins too much; for example, specify a dollar amount off when they spend over a certain (relatively high) threshold, rather than a percentage discount on smaller purchases.
4. Be proactive with: your marketing spend
The marketing column can be a tempting line item to cut when assessing your budgets, but that can backfire if you don’t stay top of mind to capture the dollars that are out there. Here are some low-cost, but effective, marketing strategies to consider.
- Tweak your digital marketing strategies. If you’re active on social media, use micro influencers, who are a perfect match with your target audience as a more affordable alternative to pricier spokespeople who might reach too broad of an audience.
- Bump up your reviews. One study found it’s not just quantity that matters: 97% of respondents considered how recently a review had been posted as an important metric so make sure you are refreshing yours frequently.
- Prioritize community involvement. Small businesses have unique opportunities to connect with the neighborhood, and strategies like holding events and sponsoring schools or sports teams can build brand recognition and create favorability among your neighbors.
5. Be proactive with: your customer service
As you know, it’s far more cost effective to retain a current customer than reach a new one. Building relationships is essential for ongoing success.
- Prioritize employee training so they are allies in engaging and cultivating customers. The great news is you are more likely to retain employees who feel supported and successful at their job.
- Be responsive when customers reach out. Provide multiple ways to reach you – for example, a direct line and an address to a real person rather than a generic mailbox. And be sure to respond quickly to inquiries and complaints, including on your social media channels, through regular monitoring.
- Solicit and respond to customer feedback. Help your best clients feel involved by seeking suggestions to show you value their input and are committed to continuous improvement.
While small business owners are currently facing a period of uncertainty, these proactive steps can help you survive – and thrive – no matter what the economic conditions. Want more inspiration to help your business grow? Visit Valley’s Learning Center for more business tips and contact a Valley business banker today.
For informational/educational purposes only. The information in this content is not advice on legal, tax, investment, accounting, regulatory, technology or other matters. You should always consult your own financial, legal, tax, accounting or similar advisors before making any financial or investment decisions, or entering into any agreement for Valley products or services. Loan products are subject to credit approval. Copyright © 2023 Valley National Bank. All Rights Reserved.
