Even with the backdrop of global economic uncertainty and the ongoing trade war, the Small Business Optimism Index managed to rise 3 points in May suggesting the ‘shock value’ of tariffs may be waning. Conversely, respondents of the NFIB’s survey indicated that inventory levels may be too low which could be directly related to Trump’s tariff policies. On the other hand, respondents had expectations for increased sales over the short term. It will be interesting to see if the perception of lower stock levels will ultimately affect the higher expectations of sales. The one constant for small business is their innate ability to adapt and pivot quickly to always changing circumstances. While owners may be in a slightly better mood than April, there are real challenges that small businesses are facing and strength in adaptability is the one advantage that could see smaller organizations through rocky waters.
Optimizing Procurement and Buying Strategies
It is a scary time for small businesses that sell goods and carry inventory. With most imported products subject to some kind of tariff, owners and managers have seen the price of goods increase dramatically. Some businesses pass tariff chargers back onto their customers while some absorb costs and increase consumer facing prices. Short and long term effects are both detrimental to businesses and strategizing inventory management is much more of a priority during a global trade war. Even simple inventory tracking and sales comparison can establish forecasts for future inventory needs. Bulk buying among different businesses that carry the same goods could potentially reduce unit costs through volume. Spending time researching suppliers may also uncover opportunities for more favorable restocking terms. Even with the many hats small business owners wear, inventory management and optimization is not a mission critical task and requires forward thinking strategies and planning.
Focus on the Basket
The potential for slowing traffic is not good for retail and consumer facing type small businesses and refocusing energies on the individual customer can help make sure all opportunities are explored. Some strategies for ‘maximizing the basket’:
- Reviewing customer service processes and identifying opportunities to build sales
- Optimizing inventory selection to include accessory products or appropriate add on items
- Launching value added services and goods
- Sharpening customer interaction and communication skills
Less traffic means fewer opportunities for transactions and each customer interaction should be viewed as a valuable asset and maximized to its fullest potential. The cliche ‘thinking outside the box’ applies and establishing new ways to generate revenue and build bigger baskets will help mitigate any potential slowdowns in customer volume.
A Mindset for Uncertainty
There takes a certain mentality or mindset for an individual to undertake small business ownership. Successful organizations sometimes only have 1 employee and the commonality among small business owners are the many roles they have to take to operate. One such role is that of the planner and strategist. Being prepared for any eventuality is the best path owners can take during times of economic uncertainty. Taking time to strategize and develop definitive plans for any type of condition can be a valuable resource for owners or managers when refocusing is needed. Using size to its advantage, small businesses can pivot and adapt much quicker than larger organizations and a sales oriented strategy will keep everyone, including the owner on the same page and heading in the desired direction.
The Bottom Line
The Small Business Optimism Index from the National Federation of Businesses is a survey based gauge that tracks the current ‘mood’ of small business owners in the United States. After falling consistently, the index showed signs of life in May, jumping up 3 points. Whether just perception or reality, small businesses around the world are facing challenges from elements beyond their control. But their smaller sizes are more of an advantage with their ability to pivot and adapt to changing conditions. Reviewing in house practices and processes, no matter how small or minute, could identify opportunities to generate revenue and increase business. Having a merchant mentality or merchant mindset is a powerful tool for owners and managers when navigating potentially choppy waters. Running a small business is an uphill battle even in the best of times and resilience is an asset small business owners will need to succeed.
