Coping with Inflation in the Post-Pandemic Economy

James Pruitt, Senior Staff Writer

Inflation has been upon us since the Pandemic. We planted the seeds through pandemic relief, which supplied large supplies of money with limited services. People saved and accumulated money, and many workers stayed home. As a result, some industries have laid partially dormant, causing supply chain issues. Furthermore, Russian aggression has limited supplies of both oil and wheat. As a result, each dollar provides fewer goods. We may find ourselves with more money but less buying power.

The good news is the following: You may find your Pandemic-era loan easier to repay. Here is the bad news for your business: Greater difficulty in procuring commodities and services necessary to continue operations.

The challenges of high inflation are myriad. First, planning becomes more complicated. Managers may have to adapt to a new environment. Businesses may commit to purchases, contracts, and personnel decisions that some owners could fear may haunt them down the road. 

Next, inflation brings cash-flow issues. As reluctant consumers bring in less revenue, businesses may struggle with their commitments. These changes force careful accounting of input and output to adapt to the changes.

Finally, business owners themselves might struggle with necessary purchases. Higher prices and wages could hit some industries more than others, and throw a wrench into the workings of the company.

Owners frequently wince at the idea of raising prices. However, cost-cutting measures may force painful decisions. For example, a certain piece of equipment may require a hard-hit commodity, such as gasoline, which needs to be rationed. Alternatively, a restaurant might need to decrease its use of a commodity, such as eggs, as inflation strikes the dairy industry especially hard. Hopefully, the business can find less costly alternatives and still maintain profits.

Especially tough decisions may strike the leadership if layoffs seem necessary. Aside from everyday costs, wages may increase as workers face their pressures. 

Fortunately, Veteran Business Owners have options. First, many seek financing when inflation strikes. A business loan might help secure commodities, pay workers, and innovate with new technologies. Unfortunately, keep in mind that interest rates tend to rise during these periods, which mitigates against borrowing if at all possible.

Second, re-assess your pricing. Since inflation tends to affect certain industries more than others, aspects of your business may become less cost-effective. A detailed accounting of cash flow may help reprioritize the direction of the business regarding goods and services.

Third, keep customers happy. Remember that your goods or services cost more during inflationary periods. Your clientele is paying more and may expect more as well. Hence, during a recession, customer loyalty can aid your survival. Coupons, loyalty programs, and good customer feedback are some methods to keep them coming.

Fourth, don’t scrimp on innovation. Adapting to new technologies may seem burdensome, but your competition could move forward while you stagnate. Additionally, technology evolves continuously, so each new adaption may keep you on track for further innovations. 

The current climate brings painful decisions. Too much money is chasing too few goods. These developments can put a snag in a company’s operations. However, on the bright side, such challenges may allow businesses to develop in their processes, policies, and operations. 

Preparing for an Economic Downturn

By James Pruitt, Senior Staff Writer

Many economists are predicting an end to the recent economic boom. A minority believe a recession is inevitable. Others point to data suggesting a future of ongoing economic health. However, the best practice for every business owner is to prepare for the worst. The economy may or may not experience a downturn shortly. Regardless, the following measures can prepare Veteran Business Owners for a variety of scenarios.

1) Diversify your Sources of Revenue

Economic downturns often strike certain industries before others. As a cushion against difficult times, consider this strategy: Try to branch out into different fields related you your core business. Your expertise likely has multiple applications.

A brainstorming session about possible new markets could do wonders in the meantime, as well as strengthen your business should troubles arise. Additionally, existing talent, expertise, and equipment can be re-deployed with a little creativity. Recessions often strike certain industries more than others, and a nimble company can jump to a slightly different part of the economy when one segment deteriorates.

2) Focus on Relationships

Your customers are the basis of your support system. To prepare for the inevitable periodic slowdown, ensure that your clients want you to succeed. An ongoing customer loyalty program might ensure a client base, and keep the cash flowing even when neither you nor your customers are in optimal financial shape. Also, after-purchase programs such as warranties may strengthen your online presence and help deal with issues before they snowball. With strong customer loyalty, when a recession does strike, your clientele can be your bulwark and continue to support your enterprise.

Also, consider your vendors and strategic partners. Business owners can use healthy times to develop their partners to build flexibility and optimize terms. This way, once a recession does hit you can get the best possible deals on any merchandise or services.

Finally, remember your employees. While recessions often do necessitate layoffs, a staff of experienced employees allows a business to operate with a relatively lean staff. Remember the costs of hiring and training. Employers should minimize turnover to ensure the business continuously operates like a finely oiled machine. In other words, treating employees well works to everyone’s benefit.

3) Analyze your Cash Flow

A good record-keeping process can facilitate analysis of exactly where money is going. Small businesses should carefully monitor their accounts, save their invoices, and give careful thought to potentially wasteful expenses. Accounting processes can make all the difference when the time comes to trim the fat. Applications such as QuickBooks, Freshbooks, and Odoo can optimize your accounts receivable and provide records that can help you budget when money anxieties loom. Also, make sure you have an emergency fund in place. 

4) Streamline your Processes

A well-prepared organization prepares to function lean and mean. Businesses should continually innovate and take advantage of developing technologies. Following the implementation of any innovations, businesses can focus on marketing in the short run while ready to downsize when necessary. Hence, your business can weather a recession without resorting to painful layoffs.

Conclusion

Strong companies make it through tough times. Additionally, a recession may weed out companies that fail to keep up with the times. Sometimes, entire industries may atrophy. The above strategies can help Veteran Business Owners put down deep roots in fertile soil, and continue to grow and prosper in the face of obstacles.

Cash Flow Loans: A Primer

James Pruitt, Senior Staff Writer

Cash flow loans are distinct from traditional business loans. Small business loans usually need collateral. A secured loan generally requires the abandonment of property to the creditor in case of default. These are known as “asset-based loans.” These loans place a lien on the property, which the creditor may collect upon default. Cash flow loans are another story. With a cash flow loan, the borrower uses future earnings as collateral. These loans may suit a business with steady earnings but not many valuable assets. For example, an online business may lack the equipment or real property necessary to secure a traditional loan.

To qualify for a cash flow loan, a borrower should keep regular cash flow statements. Careful record-keeping is essential to secure approval. In these cases, lenders check histories of accounts payable and accounts receivable before approving the distribution of the funds.

Cash flow loans generally have a quick and simple application process. However, the process can also be more expensive. Lenders must analyze the incoming and outgoing funds to ensure the business is a worthwhile risk.

These loans are generally term loans, and these days usually come from online lenders. Term loans provide money for a specific amount for a specific period and have set terms for their interest rate. Borrowers must follow these terms precisely. Usually, cash flow involves an online application and a quick decision, often within a day. 

Small Business Association, or SBA, loans generally are not cash flow loans. SBA loans do require collateral and take a much longer time to issue financing.

Remember that not everyone benefits from cash-flow financing. These loans are expensive, often with very high APRs. In addition, lenders require frequent payments. Finally, borrowers usually must guarantee the loans, and lenders can go for their assets in case of default. 

Some examples of well-known cash-flow lenders include Lending Tree, Kabbage, Biz2Credit, and Lendio. Other lenders may advertise regularly on the Internet, but Veteran Business Owners should carefully research these companies before taking the plunge. Remember that the market for online lenders allows a lot of room for exploitation, and the responsibility for vetting these lenders falls mainly with the borrowers themselves. 

However, many borrowers find the speed and efficiency of the application process worthwhile. For the most part, this kind of loan serves business owners experiencing an unexpected bump in the road. The default rate may be higher, and the lenders often compensate with harsher terms. Hence, Veteran Business Owners should take care not to fall victim to predatory lending practices.

In short, cash flow loans have their pros and cons. Veteran Business Owners should use these loans sparingly, and carefully research the lender. However, during an emergency, such loans may grease the wheels and help the business regroup. In the end, such loans can save the business, but at the same time, the borrower should not become dependent on them. Dependence can lead to a cycle of debt that a business owner may find themselves struggling to free themselves from. 

Preparing for A Possible Recession

By James Pruitt, Senior Staff Writer

Some economists have predicted a looming recession following the post-pandemic boom. The Fed has even tried to slow growth by adjusting interest rates in response to the current inflation. Whether the economy will change direction from its current growth pattern remains to be seen. However, foresight about potential measures in case of such an event can prevent heartache. There are healthy and unhealthy ways to prepare for economic uncertainty. As with much in life, balance is key.

The following are unhealthy ways to respond when the economy takes a downward trajectory:

1) Trying to take advantage

As capital seems to grow cheaper, and unsold merchandise accumulates in warehouses, some may try to stock up for the future when the storm has passed. However, remember that a true recession affects wide swathes of the economy. Reliably “recession-proof” industries are rare if they exist at all. These downturns are unpredictable, and especially for a small business, hard times offer few opportunities for risks.

2) Panic and downsize unnecessarily

On the other side of the coin, recessions often induce panic. A chilly economic climate can induce chilly behavior. Some established companies may see these times as a time to become “leaner and meaner.” Layoffs can trash the morale of both victims and survivors. However, remember that a stubborn labor shortage currently remains as fewer workers participate. A recession without layoffs may seem an unfamiliar creature, but the economy has a mind of its own. 

With a labor shortage, a skills gap adds value to existing merchandise and commodities. In other words, a lack of skilled workers increases the value of quality products. Just as bosses may regret sending workers on their way, they may also wish they held onto the assets they dumped when they thought the economy would go south.

On the other hand, well-informed measures could include the following:

1) Understand your company’s strong and weak points

Ongoing introspection can prepare a company (or an individual) for difficult economic times. A business should know the skill set they possess and understand their soft spots. 

Generally, strong companies don’t maintain a bloated, undertrained staff. Whenever possible, they promote from within instead of onboarding additional workers. Strong companies encourage workers to put down roots at their establishment. This strategy allows a versatile response to unforeseen circumstances. 

2) Emphasize the long term

As stated above, economies in recession provide few opportunities for risk. Companies should structure their operations to allow flexibility in the face of the unpredictable.  

The use of contractors and part-timers has become a widespread strategy. Such employees can often stay on-call during slow times and come in during boom periods. Absent the internal resources for a project, understanding the temp and contractor market can help when special needs arise.

As for assets and investments, beware of seemingly “one-time opportunities.” A company’s financial transactions should match the current needs of the company. Bargain-hunting can often leave your establishment with unnecessary stock, which may deteriorate in value or require maintenance to stay usable.

Summary

Preparation for an economic downturn requires a balanced approach. Given our current economic circumstances, a recession may or may not occur. However, neither excessive risk-taking nor a panicked mindset promises security. A strong, flexible organization requires a consistent approach. Remember, if anything, the past two years have taught us that we never know what the world has in store for us.

Raising Capital in a Cooling Economy

By James Pruitt, Senior Staff Writer

The once-booming economy has finally started to cool. Veteran Small Business owners may need to read the tea leaves to determine how to exploit the current economic landscape. People and institutions still have much of the on-hand capital they acquired during the Pandemic. However, as much as investors want to invest, entrepreneurs must exercise a new level of caution.

The following considerations may attract investment for a new small business as 2024 continues:

1) Innovating in an exciting, trending new field may convince investors that your company has a future.

Companies that operate in emerging fields, or service larger companies that do, can attract investors simply due to the newness of the field. For example, the Pandemic popularized Zoom. Now, we all know that such platforms have a rich future. Other examples might include renewable energy, plant-based food, and health care services. 

Of course, not all smaller businesses operate in these more innovative spheres. However, a small business in tune with current patterns can foster confidence in whoever may finance you, such as a venture capitalist.

Finally, sleek, up-to-date operations can impress friends and family, but most importantly, they drum up business. They impress those who matter, the customers. In other words, they provide the upward trajectory necessary to demonstrate to other lenders you are on a solid footing in the early stages. 

2) Your company can demonstrate clear, objective growth.

No matter what the industry, anyone who lends money will need confidence that you have something worthwhile. Depending on your stage of business development, large investors want quantifiable data. A company whose quarterly reports show ongoing growth may win the confidence of virtually anyone seeking to get in on the game. Another benefit to early growth is the establishment of a strong credit score, which may help secure loans.

Major investors want numbers. The first seeds from your operation may come from savings, friends, or family. Other investors need evidence of a clear upward trajectory.

3) Investors need to see evidence that they can compete.

You are unlikely to be the only entrepreneur with your business idea. Competition is a fact of life. Those who lend money tend to have many options, as do consumers. Successful business owners stay mindful of their competition and use their opportunities to succeed where others might fail. Entrepreneurs can learn from other’s practices, as well as improve upon them. Absent crushing demand, a strong competitive potential is necessary to sustain confidence in your developing business

Summary

Investment in your small business may come from banks, private individuals, venture capitalists, or any of many other sources. Depending on the source, your investor needs to trust in the future of your enterprise. To secure investment, business owners need solid numbers that demonstrate success. Also important for many benefactors is subjective evidence of a bright future, as well as clear, objective data. As the post-pandemic market cools, everyone is becoming more cautious. Regardless, the right idea properly implemented can still attract the capital necessary to achieve success.