Eyeing a recession, small businesses look to boost revenue and inventory
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Where this economy’s headed in 2023 is almost anybody’s guess. It could achieve a “soft landing,” it could slide into recession, or it could end up somewhere in between. Throw in uncertainty about whether another wave of COVID-19 is on the horizon, and Russia’s war on Ukraine, and suddenly it can be really hard for business owners to make plans.
Small business optimism fell in December, according to the National Federation of Independent Business. It found that more business owners were pessimistic about business conditions over the next six months, because of higher costs, difficulty finding workers, and overall economic uncertainty.
For Bright Star Early Care and Preschool in Washington, D.C., how things turn out in the year ahead will depend a lot on what happens in the labor market. Owner Marcia St. Hilaire-Finn said if more people enter the labor force, more people will need child care. But if people lose their jobs, demand for childcare will fall. As a result, St. Hilaire-Finn said her strategy this year is to build up her cash reserves in case business slows down.
However, she said there aren’t that many ways for her to bring down costs. She can’t afford to cut employees, and her rent is non-negotiable. So instead, she’s focusing on beefing up her revenue by expanding to a new floor in the building.
“We’re adding a third level, to increase our capacity by 50%,” St. Hilaire-Finn said.
That’ll mean Bright Star Early Care and Preschool will be able to take in 48 new kids. St. Hilaire-Finn said her costs will rise, but her income will rise more.
“Childcare is a numbers game,” St. Hilaire-Finn said. “The more children you have in the same building, the more revenue you intake.”
Expanding isn’t always easy when customers are nervous about the economy.
“Normally, January is a time for a lot of new business,” said Madeline Reeves, founder and CEO of Fearless Foundry, a consulting company that helps other businesses with marketing, business strategy and design. “There are a lot of projects going on for our existing clients, which is great, but we’re definitely seeing some hesitation.”
Instead of trying to add new clients, Reeves said she’s aiming to work more with her existing ones.
“Simply showing up and saying things like ‘oh, you know, we noticed that your social media presence isn’t where you want it to be. Is that something we can help you with’,” Reeves said.
The idea is to help ensure Reeves’ revenue keeps flowing in.
“Having that baseline monthly recurring revenue means that I can afford to continue operating my business,” Reeves said. “Which does put me in a stable position if there is any sort of economic downturn.”
Meanwhile, businesses that sell goods are still facing supply chain problems.
“I’m still seeing things slow in Europe, with my factories,” said Cathrine Reynolds, who handles imports for Palmetto Tile Distributors in South Carolina. “I’m still seeing some closures going on, and slower production rates.”
Reynolds said a lot of the factories she buys tile from keep announcing that they’ll be raising prices. As a result, she’s been trying out a new tactic.
“When I get the increase notices from my factory, I try to order deep,” Reynolds said. “So that I have really healthy inventory, so that price increase, when it does hit, doesn’t hit us nearly as fast or as hard.”
Maintaining healthy inventory right now also ensures that a business can sell customers what they want in the first place, said Greg Warwick, CEO of the equipment supplier TMB Baking, near San Francisco.
“Let’s say we’re talking about a spiral mixer for mixing dough, and a customer’s breaks down,” Warwick said. “[If] somebody else says, ‘well you can have it in three to four months,’ and we can say, ‘well you have it in a week,’ then we’re going to be the choice.”
Warwick said the company’s also stepping up its marketing efforts to make sure customers know what it has in stock. That’s because sales, Warwick said, are what keeps the company afloat.
“Sales is the key to any healthy business,” Warwick said. “We’re not making any fundamental changes in our business. We’re just working to grow it.”
In the meantime, Warwick said he’s keeping in touch with his bank, in case he needs to draw on his line of credit. That, he said, can help him pay for all that inventory.
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