Will Rogers, an early 20th-century actor, said, “Even if you’re on the right track, you’ll get run over if you just sit there.” Nearly 100 years later, in a connected world, the saying has never been more appropriate.
Many of our recent discussions with business leaders have focused on the impact of high interest rates and high inflation. It’s a lot to deal with, and if there’s no plan in place, overwhelm can set in and trigger a variety of unproductive fight, flight, or freeze behaviors that won’t help your business at all.
So, how do we get on the right track? First off, we invite you to get honest with yourself and with those who are most integral to your business. What do you know? What don’t you know? What do you need to know? If you’re a business owner, now is not the time to carry the load by yourself. You have a team, use them, and guide them through these key inquiries.
What Do We Know for Sure – Understand the impact of inflation and interest.
Get familiar with inflation and high interest rates from a high-level. A text-book level, if you will. Have a discussion with your team and put everyone on the same page. We’re all affected, so it’s important to know how.
We know that higher interest rates make mortgages and credit cards more expensive and dampen consumer spending. If your business relies on consumer demand, you likely have seen a change in revenues already.
We know that, as a producer of goods and services, high inflation is eroding your purchasing power. As a result, everything you do or sell comes with added costs.
We know that that the higher cost of borrowing may have you rethinking your business investments or expansion plans.
We know that (not surprisingly) lenders behave differently during an inflationary spiral. In addition to rate changes, lending policies may change and access to credit may be more challenging.
We know, from available statistics, that the monthly inflation rate has drifted down (nationally) and that some provinces are more affected than others.
We know that nationally, while the inflation rate appears to be ebbing. The rate is still higher than last year and more than double the long-term average.
What Do you Know for Sure II - Knowing your Numbers.
This part might be a stretch if you are not completely comfortable reviewing your company’s financial statements. Be honest, are you “looking” at your financials or are you “examining” them? If so, how often? Financial statements are, by default, historical documents so if you want to make changes this month, it’s best that you look at your most recent numbers and not those from a year ago.
Review financials monthly - At a minimum, review your Income Statement, Balance Sheet, Accounts Payable, and Accounts Receivable reports. It won’t take long. All current small business accounting platforms can generate these reports in less than five minutes. This leaves no excuse for not having access to up-to-date numbers.
If you’re unsure what the numbers are telling you, sit with your bookkeeper, accountant, trusted advisor, or sit with us (we’ll happily sign an NDA). It’s important that you understand your numbers, they are the tea leaves of your business. Knowing them places you in the driver’s seat While you may not know where you are heading, you’ll at least know where you are.
Know your Performance Indicators (KPIs)? – KPIs are the granular measures in your business that you can track and tweak to improve you bottom line. If you’re unsure what they are, go online and research, talk to others in your sector. Every industry has key metrics. When you and your team get familiar with them, you’ll find ways to improve them. Today’s point of sale (POS) technology provides numerous data points that will help you manage your business – this is a great place to start.
Here’s are a few KPI to get you started:
Every company: Gross Sales, Gross Margin, Net Margin
Retail: Total Sales, Number of Transactions, Sales per transaction, Basket Size, Average transaction size, Inventory Turns, Customer Retention, Sales per square foot.
Sales, across sectors: Leads per month, Prospecting Calls per month, Meetings per month, Presentations per month, Sales Closed, Sales vs. Presentations ratio, Repeat Sales (Customer Loyalty).
Customer Service: Customer Satisfaction, Returning Customers, Complaints, Number of Returns
Since dealing with inflation and interest rates is a big topic, today's tips are just first steps. I feel that if you don't know where you're at, you won't know where you're going. So, I'll end with this message - good leaders can't make good decisions without having good information. Getting on top of your numbers is essential for moving forward.
We'll move on to Step 2, next time,