Running a small business is a challenge even in the best of times, but economic uncertainty can cause greater headwinds for entrepreneurs as a host of additional obstacles emerge.
A survey by the National Federation of Independent Businesses found that small business owners’ top concerns are inflation and labor quality, with 24% of business owners pointing to each one as their most significant problem. Inflation, in particular, is causing operating costs to rise precipitously.
Such economic uncertainty may result in market volatility and changes in consumer behavior, both of which cause small business owners anxiety, but like most challenges, there is a silver lining.
Uncertainty means change is in the air and change often gives rise to innovation. Businesses that approach such perilous economic times boldly and seek out new ideas and approaches can come out ahead if they know what opportunities to look for.
In a shifting economy, businesses must be nimble in order to meet consumers’ needs. Business owners within the energy, manufacturing, food and retail spaces typically get hit hardest during inflation as customers begin to tighten their own budgets. Small business owners must reevaluate their strategies, innovate new approaches and offerings and assertively pursue gaps in the market. Acting fast in new ways can be challenging, but it can drive business growth during economic downturns.
Larger companies may react to uncertainty by becoming more risk-averse—doubling down on their usual approaches and drawing back on investments in new ideas and products. This withdrawal opens a window of opportunity for smaller, more flexible players that are willing to take some risks to grab market share.
Companies that are rethinking business strategy and offerings may also look with fresh eyes at how partnerships can amplify their efforts in a changing environment. Small businesses may work together to create a new venture, or a small business may partner with a larger corporation to get exposure and credibility.
Economic uncertainty may prompt government agencies to implement policies and programs that support small businesses through cash assistance, tax incentives or grants. Entrepreneurs can take advantage of such programs to maintain stability, streamline operations and even grow during a downturn.
Change doesn’t have to throw your business off-kilter. Taking steps to meet a moment of economic uncertainty with equanimity can help you continue to thrive.
Times that present small business challenges can be the right moments to focus on boosting morale and adhering to your mission. It can be hard not to let fear or anxiety set the tone. And it can be tempting to change course suddenly to take advantage of a trend. But dampening your attitude or departing from your mission won’t help you come out the other end stronger.
Economic downturns can present real opportunity to grab market share as competitors struggle, act cautiously or are too preoccupied to see new openings. A business that wants to snatch this opportunity must act assertively, taking on a moderate amount of risk to beat others to the punch. For example, securing an equipment loan to operate more efficiently or seeking an SBA loan to invest in your business could push your business ahead while others are contracting. Accepting risk can be daunting in an uncertain time, but it may be the best move.
Customers may behave in new ways or want different things when the economy shifts. Smart small business owners can capitalize on these changes, especially by identifying underserved audiences. Finding a niche to target with new approaches or products can strengthen a small business’s position and win a new set of loyal customers, even during a tough economy.
While the above advice to take risks and serve new customers takes some investment, doing so shouldn’t preclude focusing on business savings during economic uncertainty. Small businesses that don’t have a good financial cushion should make building up business savings a priority in this period. Unless part of your strategy is to grab market share, be cautious about taking on new debt, especially as interest rates rise. A fine moment of change
While economic uncertainty may seem like the last thing a small business needs, such moments of change and upheaval can end up as some of their finest moments. A challenge that gives rise to new ideas and assertive action can propel small businesses toward growth.
Being proactive will demonstrate your businesses reliability and could uncover additional resources, such as payroll processing to cut operating costs, guidance on protecting your assets and reviewing your bank accounts to ensure they align with your needs. Consult with your business banker for additional options to support your business during challenging times.