Many consumers look to the stock market to guide their confidence in the economy. When the market is going up, consumers buy – and if they don’t have the money to buy, they borrow it. When the market is flat, they keep their spending steady.
This market isn’t up over the last two weeks, and it’s not flat either. Traders are trying to figure out when to buy, sell and hold as the market tanks, and consumers are going to pull back dramatically on spending until things stabilize and financial recovery begins.
What should small businesses do in these times? Here’s what to buy, what to sell, and what to hold.
Buy Future Earnings
If your business has been financially conservative, there are going to be good opportunities to position yourself for future growth once the dust settles from the immediate health crisis.
Some of these will be through “inorganic growth” – buying competitor companies with a good reputation and customer base who focused too much on growing and not enough on stability.
There will be many more opportunities on the “organic growth” side – investing in the product or service development and marketing required to grow when your competitors can least afford to respond.
Sell Risk Reduction
There are three reasons that businesses buy products: to increase revenue, to increase margin, or to decrease risk. For most products, it’s normally far easier to sell them by talking about how it will improve the P&L statement than talking about how it will mitigate risk.
Today, most businesses are firmly in risk-mitigation mode.
If you’ve got a product that can help businesses reduce risk, the next few months will be a great time to focus on that benefit. Businesses are going to give more attention to products that can enhance stability during a crisis in the coming months. That’s probably true even if the risk mitigation is unrelated to the recent crisis. Once things settle down, businesses will return their focus to profit and margin.
Hold on to Your Best Employees
The good news is that nobody woke up today and thought it would be a good idea to change jobs, unless they also decided to change careers (it’s a bad time to be a travel agent). If your employees aren’t convinced that your business can withstand a downturn, however, they might consider a move in the coming months to a business that they believe is on more solid financial footing.
If you’re in a good financial footing, it’s important to give your employees enough information to have confidence that this is the case. If you’ve been investing in your employees over the past few years of economic expansion, the odds are good that they’ll believe you when you point out that you couldn’t have done that absent a profitable business model.
If you aren’t in great financial shape, have a plan for how to keep your best employees. Otherwise, your best employees will jump ship, leaving you only with the ones that weren’t so effective that they were a strong hire for another company even in a downturn.
And if you do decide to make some long-term investments during the downturn, make sure to retain enough financial cushion to keep your best employees, even if the economy faces a more prolonged recovery than your base case forecast.
To learn how WingSwept can help your business make better use of technology, call us at 919-460-7011 or email us at Team_WingSwept@WingSwept.com.