America’s 30 million small businesses are facing unprecedented global trade uncertainty. Growth is slowing. Tariffs, skills shortages and a highly competitive labor market are making life hard for small business. Rate cuts have resulted in lower profits for banks and other financial institutions, so these organizations are beginning to pare back their lending.
These factors have the potential to create a perfect storm for Main Street. But smart businesses are taking advantage of lower interest rates and rethinking their investment strategies to transform their performance. Here’s how you can do the same:
1. Reduce your operating costs
As expenses and run-rate costs rise, businesses are being squeezed. Owners must find ways to reduce costs, improve margins and generate profit. Payroll is estimated at 68 percent of a company’s costs, but while cutting payroll looks like it will have the biggest impact, remember that your people will grow your business. Consider:
- Can you cut your production costs? Try to secure preferential rates for paying upfront, buying in bulk or moving to online billing platforms.
- Can you reduce your outgoing cash?
- Are you embracing technology to cut costs? Invest in the right things to make your people productive. Boosting productivity is a very strong pathway to growth.
- Could you save real estate costs and employee expenses by encouraging agile work plans, and sub-letting office space?
2. Improve your operational efficiency
Successful businesses are in cycles of continuous improvement. Buyers have high expectations. As a business owner, you must identify ways to efficiently deliver on these expectations. Speak to your customers and staff. What would they change? What prevents your staff from delivering a great customer experience? How do your clients feel about doing business with you?
Analyzing metrics from across the business is another effective way of measuring efficiency. Do you have periods of equipment downtime or calls going unanswered at certain times of the day? Are employees spending time problem solving with clients when clients might be just as happy self-serving on a helpful webpage?
Assessing your competition can help you focus on areas needing operational improvements. In the high-ticket enterprise market, it’s important to find out why clients did not buy from you. If you’re not investing in the right equipment or technology to keep you ahead of your game, you’ll start to be overlooked.
Maintaining a health cashflow is another way to drive efficiency. 82 percent of businesses fail due to poor cash flow management or a lack of understanding of how cash flow contributes to a business. Relieving pressure on cashflow — through equipment financing, leasing or securing capital — reduces risk and places your business in a stronger position for the future.
3. Accelerate your investment programs
Market contraction generally leads to lower interest rates. Successful businesses capitalize on this and continue to invest, even during uncertainty. Securing funding now to take advantage of low interest rates is a pragmatic, low-risk growth strategy. There is a strong sentiment that now is the time to prepare: the National Center for the Middle Market Indicator found that 71 percent of businesses surveyed plan to invest extra cash into their business. Equipment purchasing is the top area of operating expense for small businesses, according to the NFIB Small Business Optimism Index. Yet sources of capital are in decline. The FDIC recorded 10 consecutive quarters of decline in small business lending. Banks are closing at record levels and, with pressure on interest rates, this is set to continue.
Businesses must expand their capital networks to ensure they can access capital throughout uncertain market conditions. Niche lenders provide a perfect complement to traditional, full- service banking relationships. Long-term relationships with these alternative providers offer organizations greater stability and ease navigating their company’s future.
At Pitney Bowes, our equipment financing business — Wheeler Financial from Pitney Bowes — is built on our recognition of the growing need for capital within our customer base. We advise our clients to look beyond their primary lender, to create a robust ecosystem of partners who can offer swift access to capital — even during market downturns — as well as financial, industry and strategic advice. This positions their businesses for growth.
For more information, visit wheelerfinancial.com.