By Christopher Sargent, CPA/ABV, AM
Senior Analyst, Valuation & Litigation Services
Email Chris
With Halloween season upon us, let’s face some fears. We’re all gearing up for it by watching scary movies and inviting spooky spirits with demonic decorations. So, let’s embrace money monsters the same way. Break out your budgets, notebooks and calculators. It’s time to conquer the biggest financial fears of 2024.
Inflation
With inflation increasing the cost of everyday essentials like gas and groceries, it remains the top worry on most people’s minds. Inflation reached a 40-year high of 9.1% in June of 2022. Fortunately, as of September this year, it’s down to 2.4%, but that’s still higher than the Federal Reserve’s target of 2%.
The Federal Reserve initially dealt with this high inflation rate by raising interest rates to 23-year highs, thus decreasing consumer spending and the demand that contributes to rising prices. Higher interest rates also increase the cost of borrowing money, preventing businesses from taking on loan debts.
That’s how the government is combating inflation. So, as a business owner, what can you do to tackle this issue?
Borrow from yourself. If you take advantage of your emergency savings fund right now, you can avoid paying interest rates to a bank or other lender. Being self-sufficient is always better than being indebted, so if you don’t have an emergency fund right now, start setting some of your revenue aside.
Cut down on excessive operating expenses. We highlighted higher gas prices above, so if you can avoid travel costs by having virtual meetings, jump on Zoom. Or downsize your office space and lean toward remote working. These changes to how your business operates could be blessings in disguise.
Although typically applied to personal finance, the 50/30/20 Rule can be a guide for small businesses when it comes to managing money. Under the Rule, 50% of income goes to essential expenses (rent, utilities, salaries, etc.), 30% to growth and development (marketing, research and development, new products or services) and 20% to savings and emergencies (unforeseen costs or future investments).
Strengthen your relationship with customers. You might not be able to lower your prices amid inflation, but you can amp up your customer service. Sure, customers could get a better deal somewhere else, but would other companies respond to their calls and emails as quickly? Or answer their questions as thoroughly? No, they’re probably buried in the daily grind because of their lower prices. This is your time to shine.
Stagnation
As businesses face fierce competition in the midst of inflation, stagnation is another big fear among business owners. That’s why you need to make your company a continuous learning environment to stay ahead of your competitors.
Ask for honest feedback from clients and employees, attend workshops and webinars, introduce a department dedicated to research and development.
You should also stay connected with current and prospective clients through social media, especially LinkedIn. This is a great way to anticipate their needs and be ready in advance with solutions, creating lucrative opportunities for all parties involved. Look at their posts and the people with whom they’re engaging. That will give you clues as to where they’re heading so you can be one step ahead. Keep moving forward toward innovation and improvement.
Crises
We talked about keeping an emergency savings fund, so what else should you do to mitigate the financial disasters you fear?
Make sure you have risk management and disaster recovery plans in place. Those plans could include investing in business insurance. That can be a business-saving step toward protecting your assets, ensuring business continuity through coverage during workplace closures, and minimizing the risk of property damage, employee injuries, etc.
These fears are valid, but you can rest assured that they’re not impossible to manage. And if we can assist you further, please call us at at 317-608-6699 or email Christopher.