23 Aug How to better manage your business during these inflationary times.
The big difference between you as an owner managers of a small business and those in employment, is that you are on your own payroll. The market will pay you based on your OUTPUT and how well it fits the mood of the market at that time, but it will not pay you based on effort. Because of this we businesspeople must be sharper in our approach that if we were on someone else’s payroll.
Life and nature follow a series of cycles. The crop in the field goes through the stages of being sown, germinate, grow, flower and eventually form seeds which are harvested when ripe. Your business too goes through the stages of growth, maturity and eventually death, if you don’t regenerate your Business model.
The macro economy out there also goes through a series of cycles. I have been observing these economic cycles over the last 50+ years and my observation is that they follow a pattern. After every peak there is a trough and after every trough there is another peak. The most striking difference emerging over the years is that these cycles are shortening. The trigger point for the movement from one phase to the next is something major such as COVID, a serious war and or other reasons. Most business people will be in business for 3 of these cycles. Either two peaks and one dip, or two dips and one peak. Within these macro movement, one will find a series of mini cycles.
You and I cannot do anything either individually or jointly to influence these macro cycles. We as businesspeople need to understand them and then decide how we are going to anticipate and react to them. This involves each of use identifying the micro variables within and about our businesses which we have some control over and allocate our resources accordingly. If we succeed in doing this, the market will pay us well, if not then the market will scald us.
My first piece of advice is not to “put your head in the sand” and wish it away. The macro tide will come in irrespective.
The current cycles manifests itself as an inflationary cycle. Many current business have only been in business during the deflationary period from about 2007 onwards and have no PRACTICAL experience of trading in an inflationary cycle. While your business fundamentals stay upright, your strategy and business tactics need to change so as to reflect the reality of trading during an inflationary cycle.
I will address some of the strategies and the tactical realignments you need to make in your business, both during our Podcast on September 5th, which you can listen into via the Wexford LEO website and in far more detail for those of you who will be participating in our Owner Management Development Program (OMDP) which you can book your place on, again via the Wexford LEO website.
I will just give you a flavour of the variables you need guidance on, so that you can be more professional and start to build your WEALTH irrespective of the macro environment. With the right set of “tools” you too can have real business success both during an inflationary cycle as well as a deflationary cycle. You just need to be sharper. Here are 14 strategies / tactics you need to build your appropriate business capacity around.
You need to fine-tune your strategies during inflation trading period
- Capital structure of your business.
- Establish your Differentiation.
- Plan ST to survive and LT to build wealth.
- Reduce UNIT costs.
- Automation /Technology / systemisation.
- Early pricing tactics.
- Costing based on replacement costs of material.
- Engage with your key people.
- Sourcing tactics.
- Build inventory.
- New recipes / formulations.
- Kill the identified tails to your business.
- Protect your Working Capital and reserves.
- Reduce exposure to bad debt.
I via the podcast and for those of you who will be participating in the upcoming OMDP, will take you through the PRACTICAL detail of each of these business variables and together we will develop practical Action Plans, so that you can equip yourself to be an even better businessperson into the future, irrespective of the prevailing cycle type.
The current cycle is an inflationary cycle, so we will use that as the backdrop to guide us on how best your bottom line can be optimised.
You don’t need to be an Einstein to be a successful businessperson, but you do need to have clarity of purpose underpinned by an appropriate roadmap and be suitable BRAVE.
My Mission is to help as many businesspersons as possible to optimise their business potential. I am here to help you via Wexford LEO.