The past three years have driven the business sector on a roller coaster. The pandemic paved the way for non-brick-and-mortar stores. However, 2022 became a challenging year, characterized by skyrocketing prices and interest rates. In early 2023, the US faced a brief banking crisis following the Silicon Valley Bank Collapse.
Now that inflation has already decelerated, growth prospects are quite rosy. The target band of 2% may be met in 2024 and lead to a Fed rate cut. Even if recession woes are still here, businesses are more optimistic. It is more evident in the fourth quarter of 2023 as holiday spending splurge stimulates business performance across industries.
Entrepreneurs and analysts expect a solid rebound in 2H24 as the business sector recovers. However, they still don’t let their guard down, as weak external factors remain noticeable.
Nonetheless, the market environment appears to be less volatile than it was in the previous year. In this article, we will give tips to fortify your business amid the gradual economic recovery.
Check Historical Performance and Know What To Develop
With the recovering demand and economic growth, business owners must increase their productivity to cater to more customers and generate higher sales. It can also lower input costs, which is a crucial factor in adjusting prices and driving more demand.
As a first step, you can review the historical performance of every product or service your business offers. Compare their sales to costs and expenses to determine and focus on what you do best. You can increase your product or service production to accommodate more consumers.
Meanwhile, you can reduce, improve, or remove the product or service that affects your overall sales and margins. To better check the performance of the business, use the EBITDA Margin to account for all operating costs and expenses except D&A.
Additionally, you must look into the Balance Sheet to measure your business’s capacity to sustain itself. Concentrate on liquid assets, inventory, accounts payables, and borrowings. You may use the Acid-Test or Quick Ratio to compare your liquid assets to the current liabilities. Doing so can help you assess whether your business can cover current financial obligations.
You can use the Net Debt/EBITDA Ratio to check your business viability and sustainability. It will help you assess if your business is earning enough to cover all borrowings after cash. It is crucial since interest rates or borrowing costs are still elevated despite the rate hike pause for three consecutive quarters.
If you have more than enough cash reserves, you can invest them to multiply your resources. Doing so will help your business get passive income. Thankfully, a lot of reliable trading platforms are already available today.
Maintain High Employee Retention
Labor is one of the primary components of every business. All your office equipment, machine, and cash are nothing without it. No one is there to produce and serve your customers.
Artificial intelligence is already popular and crucial in most industries, especially customer service. However, these cannot do everything a human employee does. AI cannot substitute those requiring high skills and hard labor. Your prized employees are the crown jewel of your business, and you don’t want to see them jump ship.
To prevent spending much time and money on hiring and training new employees, keep them happy and motivated. Salary raises and bonuses can be a great way to satisfy them.
However, there are many other aspects that employers must consider. Sometimes, non-cash rewards are what will keep them in your company. For instance, you can create a vibrant yet relaxing ambiance.
Soft-skills training will also help so employees will not feel stagnant. Implementing remote work flexibility can lessen burnout. Lastly, open-door meetings to listen to employee questions and suggestions can make them feel valued.
Keep Your Customers Engaged
Ensuring consistent customer engagement is a cornerstone of enduring business success. When you reach out to your customers, they may feel valued or involved. Not everyone will be as responsive or eager as you expect, but many will be happy to give their comments and suggestions. Their opinions matter since these are free of biases.
Online marketing and surveys can be an effective way to do it. However, a more comprehensive method is the Quarterly Business Review or QBR. You can do it monthly, if possible, especially if you are new to the industry. It can help you track your product and service performance to set your goals. Hence, you can determine areas to concentrate on or improve to increase or maintain demand.
Automate and Digitize
The digital revolution has already peaked. And now, more and more businesses and customers are going online. AIs are a manifestation of it. You may want to use AIs to improve customer service and develop data analytics. For startups, you may do the basics before turning to AIs.
For instance, you can use the right tools and software to optimize and streamline workflow management. You can capitalize on human capital management (HCM) solutions that are convenient amid the prevalence of hybrid work. These can help you connect with your employees even if they work away from the office. You can also use HCMs for payroll management to minimize or eliminate errors and avoid problems with employees and internal revenue officers.
Another way to capitalize on the digital revolution is by increasing your online presence. Social media platforms are there to reach out to more employees. You can promote your business for free or pay a certain amount to reach your target market. Interactive websites are very helpful so customers can learn more about your business without calling you.
Lastly, you can do cashless transactions with your customers and suppliers. This will make everything smoother now that many people are on the internet. Also, cashless transactions have electronic invoices, so checking and tracking all transactions will be easier. Hence, you will not have to worry about coming to the office and digging into piles of invoices.
Keep an Eye on the Economy
Business owners must observe macroeconomic changes since these can dictate the direction of the market. Higher inflation and interest rates mean higher prices and borrowing costs, which can limit spending and investment.
Some industries are less sensitive to macroeconomic changes, given their lack of substitutes or the extraordinarily high demand. But overall, these can affect consumer behavior and business production capacity. So, getting constant updates can help you make well-thought-out business decisions.