Oh no! It is time to put your Scrooge hat back on and think about what this year might bring to your business.
Business success is all about relationships and those relationships are about to be seriously tested in 2023.
Although I thought discretionary spending would tighten up sooner than it has, there has been lingering, positive consumer spend in Australia driven by a mindset that has thrown caution to the wind based on the belief “I have survived the pandemic, why shouldn’t I spend money on myself”.
This can only last so long as the reality of climbing interest rates is going to rapidly change this ‘pollyanna’ view of the economy, personal needs and discretionary spend.
So, what should you do?
The key relationships your business partners with and rely upon are;
- suppliers on the one hand, and
- customers on the other, and
- usually the landlord in between!
Who amongst these ‘partners’ do you believe will be naughty or nice when business conditions tighten?
Questions to ask of suppliers include:
- Who will be open to extend credit when push comes to shove?
- Who has a return policy that you trust if you need to reduce inventory levels or slow sellers?
- Who will continue to prioritise supply to you when they also reduce inventory holdings?
- Which suppliers have a history of or are most likely to pass on price increases as market conditions tighten?
Questions to ask of customers:
- Who will try to squeeze you on prices?
- Who will continue to stay loyal to your business?
- What customers may you have to ‘drop’ to keep any associated operational costs and overheads to a minimum?
- What discretionary products and services will they likely cut back on?
Something to note in relation to your landlord.
During the pandemic, there was government intervention to assist businesses. This is not as likely due to tightening economic conditions. So, how tough and naughty is your landlord likely to be? Perhaps they will be nice, but remember what Scrooge might think.
I know the fun and frivolity of Christmas is over, but with the new year upon us, these are some simple, planning questions you need to start considering as you rank your partners as naughty or nice and take corrective action before the spending noose tightens.
Have a written backup plan to review and reshape your business relationships as needed. For example, start planning lease flexibility now, setup extended payment terms etc.
Don’t let the Scrooge mindset dominate, but recognise that even Santa Claus had to make decisions about who is naughty, who is nice, and how this impacts his planned and actual business operations.
