Downturns are tough on businesses, but thriving economies present their own challenges. While no small business owner is going to complain when sales are brisk, the reality is that resources are typically in short supply, costs go up and other problems arise.
Several indicators are pointing to an increasingly robust economy, one of which is how small businesses are feeling about current conditions. The National Federation of Independent Business’s (NFIB) Small Business Optimism Index recently hit an all-time high, for example.
Review the following common boom time challenges, and tips for facing them.
Wages have recently been on the rise, according to the Bureau of Labor Statistics. While the obvious fix to stay competitive is to offer pay raises to recruit and retain, you may be nervous about getting locked into high salaries that will squeeze your company when an inevitable downturn comes. Instead, look for other ways to increase compensation.
One-time bonuses are an excellent way to reward staff for their hard work, and curtail permanent overhead increases. You can also establish a bonus program that is tied to your company’s performance, so you only provide more money if your business brings it in.
Competitive Job Market
The NFIB Index found that while 41 percent of small business owners have job openings, 83 percent of them can’t find qualified workers. And it’s no wonder: In May 2018, with unemployment rates at their lowest level since 2000, the Department of Labor reported that the number of available jobs exceeded the number of job seekers for the first time on record.
It’s clearly a candidate’s market, so how can you attract top talent? Try offering lifestyle perks that can make your company a more pleasant place to work. The current top employee pick is remote work and flexible hours: 34 percent of employees would switch jobs in exchange for full-time, flexible work, according to Gallup.
However, keep in mind that once you add a perk, it’s difficult to take it away, even when times get tough. To avoid this, focus on perks with lasting value to your business, not just trendy extras like bringing dogs to work.
Demand for commercial property drives up the cost of rent. In addition to competition for a finite amount of space, building owners are paying more to buy and maintain commercial properties when times are good. They then pass these costs on to renters. Commercial rents have soared in the past few years, as urban areas become more popular with both businesses and homeowners.
It is hard to counteract the reality of rising rent, but you can stay informed about market conditions in your location, so that you know a good deal when you see one. Don’t wait until your lease is almost up to renegotiate; you’ll have more leverage if you start the discussion with your landlord several months in advance. If higher rent is keeping you from moving to a bigger location, look into creative alternatives, such as co-working spaces.
An influx of business optimism means your competitors are stepping up their marketing. To remain competitive, emphasize in your messaging what sets your business apart — for example, a unique product mix, or a service that no one else provides. Be sure you’re using the outreach method and social platforms your customers and prospects are most likely to use.
In boom times, many small businesses devote all of their energy to attracting new customers. Landing new business is important, of course, but new customers are often the first to leave if the economy goes south. Focus on retaining existing customers, too, and you’ll have a firm foundation for success, no matter what direction the economy takes.
Services Are Scarce
If you rely on printers, designers, drivers, warehouse workers or freelancers or contractors of any stripe, they may be harder to book — and they may cost you more. Many small businesses depend on these service providers during economic upturns, as they don’t have to keep them on permanent payroll but can still meet customer demand.
The best way to have access to these resources when you need them — and to jump the line ahead of other companies — is to treat them well. Aggregate your needs into as few as possible freelancers, so that you become a reliable source of work. Also, make sure you pay these providers promptly to build your reputation as a trusted and dependable company.
Economic boom times mean great things for your small business. But it requires work and preparation to ensure that your company stays afloat when downturns arrive. Focus on protecting your business now, so that you remain successful in the future — no matter the economic conditions.