Handling Economic Uncertainty
When volatility hits, here are some actions you can take to set yourself up for success.
BE SMART WITH YOUR MONEY
One of the smartest ways to deal with financial uncertainty is to control what you can. You can’t control the general economy, but you can determine how you deal with your money and cash flow. Here are a few strategies to follow when dealing with financial uncertainty.
KEEP AN EYE ON COSTS
In the same manner you keep an eye on your personal budget, look closely at all your business expenses to make sure you’re being efficient. Keep these three tenets in mind: 1.Track every expense closely 2.If you can live without it, forego it 3.If sales are down, reduce your expenses
REFINANCE OLD DEBT
If you can pay off your debt, great. If you can’t afford to pay it off, consider refinancing or consolidating at a lower rate. This allows you to put more principle towards your debt and bring the balance down. No different than what you might do with your personal finances, like a credit card.
REWORK YOUR TERMS
If you are waiting 45, 60, 90 days for invoices to be paid, it might be time to consider reworking your A/R structure so you reduce the days until you get paid. If your client is unwilling to negotiate terms, you may be able to suggest implementing a late fee if they pay past their scheduled term. Either way, just remember that in a bad economy, cash is king – whatever your terms are, make sure you have the cash available to cover it.
REVISE AND UPDATE YOUR BUDGET
Whether you want to earn $5 million or $50 million in revenue, you need a plan and to know how to execute it. A forward-thinking company also understands the value of analysis. Are you consistently reviewing your budget to ensure it is current? This is a particularly helpful way to combat changes in consumer demands.
FOCUS ON RELATIONSHIPS
In tough times, the people you rely on make a huge difference in weathering the storm. The same principle applies to business – who are the people and the strategic partners who can help your business long term? The relationships you build with customers, suppliers, or others staffing firms are crucially important, particularly during uncertain times. Trust plays a large role in building business relationships. Trust takes time to earn, but can be destroyed in minutes. Here are some keys to building business relationships.
START INTERNALLY
Trust starts at home. Focus on creating an environment inside your staffing firm that prioritizes fairness, trust, and honesty. This goes a long way towards building loyalty. If your people are jumping ship, it may be time to analyze your culture and fix what is wrong before your customers start to wonder why.
BUILD YOUR REFERRAL LIST
Some of your best business will come from referrals, so it’s important to keep and maintain a good list of your industry contacts. Start by taking a few minutes to identify 25 people who can help you move your business forward. These can be vendors, prospects, customers, former customers, strategic partners, and people you don't yet know. Then put them on a list and begin the relationship-building process.
SPEND TIME FACE-TO-FACE (WHEN POSSIBLE!)
During ‘normal’ times, face-to-face is ideal. In today’s shelter-at-home environment, utilize technology with video/virtual meetings to maintain that personal connection. To really get to know someone, you must spend time with them face-to-face. This applies to your business networks, your team members, your vendors and, most importantly, your customers. You cannot depend on emails, texts, newsletters, blogs, etc., to build these relationships.
COMMIT TO IT
Building strong relationships requires a commitment of time and effort. If it’s not blocked out on your calendar, chances are that it’s not happening. Commit it to the calendar and then intentionally focus on relationship building.
ALIGN WITH STRATEGIC PARTNERS
Success doesn’t happen in a vacuum. Which strategic partners does your business need in order to move forward? Chances are there are certain areas of your business that could be improved with outside expertise. It’s worth seeking out paid partners as well as other business relationships to build your strategic network.
GIVE WITHOUT EXPECTING IN RETURN
Reciprocity is a powerful psychological phenomenon – when you get something, you want to give something in return. Use this to your advantage by passing along good information, resources, or tips to your business contacts, even if it doesn’t directly relate to your bottom line.
Take Advantage of Tax Opportunities
In general, the current tax code under the Tax Cuts and Jobs Act is beneficial for the staffing industry. We now have lower tax rates across the board, and most staffing firms are eligible for the “pass-through entity” tax deduction. This means that most firms can potentially deduct up to 20% of “Qualified Business Income” – or “QBI” - from federal taxable income. USE APPLICABLE TAX CREDITS If applicable, take advantage of the Work Opportunity Tax Credit (WOTC), a federal tax credit rewarding companies for employing individuals who have previously faced significant barriers to employment such as veterans, long term unemployed, and food stamp recipients. Employers can earn up to $9,600 in federal tax credits for each qualified employee, and there is a good chance you may already be hiring individuals from these target groups but not claiming the tax credits.
In today’s environment, also consider the benefits of The Coronavirus Aid, Relief, and Economic Security (CARES) Act tax credits.
Reinvest in Your Business
The money that you earn by working hard at staffing is yours - don’t let the IRS take more than they have to! Investing back in your business is a great way to use your capital. Areas of focus include: • Technology – such as a new back office system or ATS • People – such as a new salesperson in a new region • Equipment – such as a new computer system • Places – satellite office or on-site location
Ultimately those expenses flow through your income statement and reduce your taxable income. Plus, with the recent expansion of the Section 179 deduction, you might be able to deduct the cost of some equipment.