Ways to Keep Your Business Growing in 2019 Recession
Now that the Christmas and New Year celebrations are over, it’s time to think about your business. This year is not going to be an easy one – there are too many challenges on the horizon, and the global events will impact even small local businesses. We have picked the main factors that may (and most probably will) impact your bottom line if you don’t pay attention to them and apply countermeasures.
3 Things that Will Make 2019 Challenging
The global economic landscape is approaching a new recession. Here are the main factors that may impact your business, regardless of its size or location.
US Policies Are One Big Roller Coaster
Well, where do we start here? The sitting US president’s financial policies have already jittered the financial world, and they deserve their own piece. We’ll focus on the main decision that will have a lasting impact on the US and global economy: trade wars.
Trade wars are a series of protectionist import tariffs imposed by Donald Trump since the beginning of 2018. Among others, tariffs have been imposed on steel (25%) and aluminum (10%) from the EU, Canada, and Mexico, as well as all other countries worldwide (except for South Korea, Argentina, Australia, and Brazil). This caused the EU to introduce tariffs on goods exported from the US as a retaliation act. So, if your small business sells steel or aluminum to the US, you must have already felt the costs rising.
EU Is in an Economic Slump
There are two key things that prove the EU is facing a recession. First, the eurozone’s two leading economies (Germany and Italy) seem to be soon falling into a recession. Germany’s industrial output decreased by 5.1% in November (compared to November 2017), which is the worst performance since the global financial crisis.
Italy’s total industrial output went down by 2.6% in November as well (compared to November 2017). Apart from that, Italy hasn’t been doing well in 2018 at all due to the budget deficit. Besides these two economies, France’s economy is facing challenges due to the “yellow vests” protests.
Second, the whole eurozone has seen a decrease in the industrial sector’s performance indicators. According to Eurostat, total production in industry went down by 1.7% in November (compared with October) and by 3.3% (compared to the November 2017). Considering that industry is the main driver of most EU countries, this will be a hit at the EU as a whole.
So, if you have EU-based business partners or you provide your products or services directly to the EU customers, you will feel the nearing recession - customers and businesses’ purchasing power alike will decline.
Other Hints at Upcoming Global Recession
It’s not just the US and the EU you should be concerned about. There are signs that the global economy is approaching the next recession.
One of such signs is the US bonds’ inverted yield curve (this curve reflects the relationship between the rates on short-term and long-term government bonds). The curve’s inversion in December 2018 means that rates for short-term bonds are higher than for long-term ones.
Why should we care about this? The US yield curve inversion happened in 2006 as well – and two years after the global economy was struggling with a global recession. Besides, this has already caused some investors to bail on bank stocks – so, perhaps, it is also a matter of a self-fulfilling prophecy besides a direct cause-and-effect relationship.
All in all, if we are approaching the global recession (and, like the 2008 crisis, it will impact all countries and economies), your business has to brace itself and optimize the business processes to keep growing despite it.
How Global Financial Turbulences May Affect Small and Midsize Businesses
What does it all mean for you and your business? If you operate in the US, China or the EU countries, you are likely to be impacted by new regulations (including taxes) being imposed by the government in attempts to help the economy recover, as well as the ones being introduced in the trade wars. And taxes impact every business, be it a small firm or a leading corporation.
If your business partners or suppliers are from those countries, a part of the burden will be placed on you in your deals, too. And if you run a small or medium-sized business, the consequences may be too big for you to manage to keep your head above the water.
You may think your business is too small (and/or too far from China, the US and the EU) to be impacted by stock prices and other global global turbulences. Yet, it’s not completely true. Even if you don’t directly trade with any foreign companies, you are still likely to feel the impact.
How? Via your supply chain. The thing is, even if you purchase items from a local distributor, that company is still likely to get the items from either the EU, the US, or China. Considering the current financial landscape, your supply is likely to get only more expensive, but you need to manage to keep your prices affordable for your customers - or, they will turn to your competitors that offer lower costs. Keep in mind that if your country is in recession (or close to it), your customers’ purchasing power is declining - so, the price will matter to them.
The Key to Growth in 2019
This is the part where you think, “How do I make sure my business keeps growing despite all of this?”. You can’t possibly change Donald Trump’s mind or investors’ behavior, but you don’t need to. There is one thing you certainly can and should do: review your costs.
The lower your costs are, the more affordable your pricing policy can be - and combined with a proper marketing and business strategy, your product or services will attract more customers. Being a small business in such a landscape is not a disadvantage - it’s an opportunity waiting to be used.
Digitalization (i.e. replacing manual work with specialized software), a global business trend, is here to help you with reducing costs. You can automate your sales and interacting with customers by implementing a CRM, or introduce a software solution for procurement, purchasing and spend management (like, for instance, Precoro).
Here are just a few benefits you can get out of this endeavor:
Increasing employees’ efficiency by automating manual tasks like placing an order;
Decreasing labor costs as the result;
Reducing losses caused by human error by eliminating this risk;
Storing all the relevant data in one place;
Using the collected stats on your current costs to optimize your spending;
Keeping track of your inventory.
Supply chain management costs are often hidden and, therefore, underestimated. Yet, this is exactly they are worth your attention. So, if you haven’t gone digital in supply chain management yet, 2019 is the best time to do so and optimize your costs, thus making sure you keep your head above the water.
Automation is what will help you deal with the challenges of 2019. Although it may be a tough year for some company, it doesn’t have to be for you. Take a look at a specialized procure-to-pay system and start adopting one to ensure your business growth in 2019 - optimizing costs never gets outdated.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.
Will AI kill our creativity? It could – if we don’t start to value and protect the traits that make us human