In Part I of SVA's Economic Impact Webinar Series, SVA's experts discussed the economic challenges facing businesses and shared their insights on what business owners should watch and plan for in the coming months.
Evaluating your perspective on how you look at your financial data is imperative. Reviewing your revenue goals and looking deeper into the numbers will help you understand what drives your actual net-revenue increases.
Using historical data has been a major part of determining future goals, projections, and budgets. That has changed significantly, as historical data isn't as relevant right now. The economic impact of supply chain issues and rising costs means that historical data isn't a good benchmark for future planning.
It's a different environment, and while reviewing historical data is good, it isn't as reliable of a benchmark for the future as it has been in the past. Hopefully, once things stabilize, historical data will again be more reliable for future planning.
Businesses must be able to react quickly to fluctuations in costs and pricing. Agility is the key. Move away from printed catalogs, menus, etc., so you can easily adjust prices.
Costs and wages are constantly changing, and your pricing needs to reflect that. Seasonal businesses are accustomed to some of that volatility, but it's never been as drastic as cost variables are now.
Don't wait for a dip in your financials before you adjust. At that point it is too late and you are already behind in revenue. Projections are imperative. Based on current expenses, project out your sales and expenses three, six, and twelve months. Review them often and adjust as needed.
Supply and demand are significantly affecting businesses right now. Supplies are limited, but demands are high.
The list of what is affecting supply chains is long and could include any or all of these factors:
The reach of what can impact your business is vast.
In the past, the recommendation was to limit suppliers so you could take advantage of rebates and bulk pricing. Where you got the supplies/inventory you needed wasn't as important as the price you were paying. That has changed.
You can't risk not being able to get parts or inventory if your leading supplier cannot deliver it. Look for alternative suppliers so you don't get caught not being able to provide for your customer orders. Review where your suppliers are located. Maybe local is better to prevent challenges in delivery.
If you have an inventory shortage, can you make your product with alternative parts/goods? Think outside the box. Maybe you could acquire the company that supplies a significant part of your product. Perhaps modifications can be made to your offerings to accommodate varying raw materials.
Key employees are getting a premium wage, but is that sustainable when the economy changes?
Once raises are given, you can't go back and reduce wages, so be strategic when compensating employees. Having the right people on your team is imperative, but company culture is also essential.
It is not always compensation that drives an individual to look for another position and leave your company. Be transparent with your employees. Share data and make them feel like they are part of the process.
People stay at a company because they like coworkers and owners. It is not always about money.
For contractors, be sure your future contracts include contingencies or escalation clauses. You can't rely on what costs will be nine months from now.
If you are in the hospitality industry, menu prices should be reviewed often and adjusted accordingly.
Monitoring your inventory and adjusting pricing can be complicated. If you raise prices based on your current inventory costs and have two months of stock left, your gross profit margins will look higher until that inventory is gone and needs to be replaced with a higher-priced stock. Then your gross profit margin will be reduced. While price increases are difficult for many business owners, you must maintain a good profit margin year-round.
The labor shortage and higher wage demands are impacting service businesses' pricing, requiring fee adjustments. For businesses who charge by the hour, based on services provided, price increases will be mandated by increased employee wages.
SVA's 2024/2025 Salary and Benefits Survey results showed almost every veterinary practice that responded to the survey raised their fees at least once in the past year. Aligning your prices to increased costs means you need to be flexible with your service pricing.
Most businesses are facing the same challenges you are. Communicate with your staff and your clients, so everyone knows the situation.
If you can't meet a customer's order, tell them upfront. Don't overpromise and underdeliver. It's hard to recover when a customer has a negative experience.
However, if you explain the issues, your customer will understand you are doing your best to provide the required service. You may still lose some orders, but it won't permanently affect your client's view of your business.
Be honest with your staff, so they know what to tell your customers. Informed employees won't overpromise and will help make your customers comfortable with what you can deliver and when.
Good customer service has never been as vital as it is right now.