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Current Events

Best Advice for Cooling Small Business Market

We will cut to the chase with this: If you are looking to sell your small business right now, don’t, unless you don’t have any choice. That’s the best advice when faced will this chilly small business market.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

2nd Quarter Trend Continues

The change of the small business market, as evidenced by number of businesses sold. Our article provides advice to help

As we mentioned back in July in our post How to Benefit if the Small Business Market is Coolingsmall business valuations started to cool in the 2nd Quarter of 2019. The market has continued to be chilly the 3rd and 4th quarters.  

Perhaps the 2Q marked the low point, but it’s too soon to tell.

What Should You Do if You Can Wait?

As we mentioned before, there are a couple of important steps you can take. Here’s our advice for surviving the cooling market.

Make the needed repairs while the small business market cools

To re-use the analogy to the housing market now is the time to invest in renovations that will make the house more valuable when the market eventually turns. What are those fixes you can make?

  1. Clean up your business model: Take the time to fine-tune and root out the inefficiencies 
  2. Strengthen your brand: Continue to delight your customers, and with their help, promote your business within their networks and with the broader market at large 
  3. Improve your profitability: By fine-tuning your business model this may be a natural outcome, but if not, look for ways you can pare back costs without sacrificing quality. 

Continue to invest to make those repairs and grow your business

In a previous post, “5 Proven Methods for Accelerating Small Business Growth”, we covered several hacks you can deploy to help keep your business moving forward. 

If you can make these investments, you are likely to be in a much better position when the market rebounds.

Our Advice as the Market Cools...

Sometimes you just can’t wait. What should you do if some life event made it impossible to continue? 

Manage your expectations

Know going in that it’s a buyers market. People are looking for deals. They are not paying premiums right now. According to Washington Post, “median sales price for a business edged up just 0.1% during the third quarter from a year earlier…[while] asking prices rose 3.3%”. So, obviously sellers had to drop the prices to make the deal. Unfortunately, this is price for a quick exit right now.

Put Your Best Foot Forward

Good companies will always be valued. “Although sales are down and prices have lost their momentum, companies can still be a good buy because they’re generally in good financial shape after years of economic growth” BizBuySell.com. Try to get you financial house in as much order as possible. Look at how you might be able to value intangibles like good will and customer base. You may not be able to use those to get a premium, but they could be bargaining chips to get closer to your asking price. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Current Events

Who Were the Winners of Small Business Saturday?

The end of the year – and Small Business Saturday in particular – is one of the most important seasonal events for small businesses of the year. And thankfully for small businesses closing out the decade, sales were up by about 10% in 2019 compared to 2018. That’s according to a survey from American Express and the National Federation of Independent Business (NFIB). But that was a survey, NOT real sales. We waited a month to see if other data became available, and there were a few key insights. Let’s take a look at the winners and losers, shall we?

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Who Were Small Business Saturday’s Winners?

The data is pretty clear. If you have an ecommerce platform, then you likely did better. If you had a mobile-friendly e-commerce platform, you were an even bigger winner.

Smartphone Savvy Retailers

According to Adobe Analytics, which tracks online sales, $3.6 billion of Small Business Saturday purchases were made with smart phones. That’s 18% of the total sales on Small Business Saturday. In fact, that’s up 22% vs. prior year according to the same report. 

E-Commerce Retailers

41.2% of all purchases on Small Business Saturday were made via e-commerce. That’s nearly 4 times the national average. According to the US Census, approximately 12% of all retail purchases are made via e-commerce. So, small businesses with a smartphone optimized e-commerce platform were the clear winners.

What Were the Losers of Small Business Saturday?

Well let’s cut to the chase: pure brick-and-mortar retailers appeared not to have benefited as muchThe internet and main street fight continues.

Traditional Mom & Pops

A 10% increase in spending is not that much, especially if nearly ½ of it is accounted for by e-commerce. The growing share of e-commerce sales is likely negatively impacting the traditional mom and pop retailers, who tend to lag in technology adoption. 

Key Take-aways for 2020

Consumer awareness is very high

According to the AMEX survey, 70% of all Americans are aware of Small Business Saturday. That’s huge. That’s a higher percentage than the number of American, who are aware of who is playing in the World Series. As a small business, you don’t need to educate them about the event. You just need to remind them that you are a part of it.

Consumers want to buy local

In fact, 3 out of 4 shoppers want to buy locally. The vast majority believe it has a positive impact. According to the aforementioned American Express survey:  

respondents who shopped on Small Business Saturday (96%) agree that shopping at small, independently-owned businesses supports their commitment to making purchases that have a positive social, economic and environmental impact. 

The key is to keep them engaged year-round. If you were one of the tech-savvy winners, you have their e-mail. E-mail reminder campaigns are a great way to keep them engaged long after Small Business Saturday has come and gone. 

Close the tech-gap

If you haven’t built some e-commerce capabilities, this data should scare you. Today, there are a number of low-cost, easy-to-use, mobile-friendly applications on the market. The trend towards digital is growing. In addition, the ability to reach these consumers after the sale is also a great way to keep them. You will miss out on both if you aren’t in the game.

Digital promotions are likely to be more effective

Given the dramatic shift to e-commerce, especially smartphone purchases, digital, geo-fenced ads and promotions are likely to be more effective in driving and awareness and purchase. Anyone participating in Small Business Saturday in 2020 should definitely include these in their marketing mix. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Current Events

U.S. Small Business Optimism Stalls

We’ve had a lot to say about small business optimism before, and yet there is never enough thought on the matter. While small business optimism rose slightly in October to 102.4 from 101.8 in September, it has stalled compared to the yearly average. Despite being at a solid level, small business optimism is 4.25 points lower than in 2017 and nearly 2 points lower than 2016. While higher than the Obama administration, U.S. small business sentiment is at its lowest level during the Trump administration.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Labor Indicators Appear to Have Peaked as Optimism Stalls

All three indicators of hiring have peaked or plateaued. Net hiring is down from 0.52 workers/firm in February to 0.12 in October. Planning to hire metrics also appear to have peaked in early 2019. 

Sixty percent reported hiring or trying to hire (up 3 points), but 53 percent (88 percent of those hiring or trying to hire) reported few or no “qualified” applicants for the positions they were trying to fill – The National Federation of Independent Business

Optimism is at a standstill as small business hire less
optimism is at a standstill
Optimism Stalls as small businesses stop hiring workers

It’s also clear from the number of job openings that finding qualified labor continues to be a challenge. We’ve discusses ways of trying to eliminate bias as a potential solution to chronic shortages. Also, it is unclear, but likely that our severe drop in immigration has dried up a potential pool of workers, thereby hampering our growth. And as growth stalls, so too does optimism.

Tight Labor is Putting Pressure on Compensation & Earnings

Higher worker compensation rose to a net 30% across all firms. With a tight labor market, compensation is the most likely, but not the only way to attract and retain qualified worker. As we‘ve mentioned before, employees are motivated by more than just salary. The majority of companies rely solely on compensation, which has a negative impact on earnings given counter inflationary price pressures. Earnings peaked in early 2018, and they have been in a downward slide since.

Trade Policy is Negatively Affecting Capital Spending

We have written numerous blog post about our point of view on the current trade war stance, and it’s negative impact on small business. According to NFIB survey, others feel the same. 

Trade policy is impacting many small firms adversely; about 30 percent recently reported negative impacts. Making commitments about production and distribution will be more difficult until import and export prices are stabilized with trade agreements. – NFIB

Hopefully, the pressures of an election year will allow for a cooling of tensions, but we will have to wait and see. As of now, it has left us in a standstill as small business optimism is in a holding pattern

Positive Tail Winds: Credit, Sales, and Inflation

Credit availability and inflation are the two positive spots in this report. Sales are strong, but uncertainty is holding it back from its full potential. Another set of effects of a stall in optimism, but one that could have a more positive result.

Sales

4% of business reported higher sales in past three months, up 2 points. In addition, 17% of owners expect higher sales in the next 3 months. Sales have been steady, but there is significant uncertainty due to the action by the Fed, recession worries, and political chaos in Washington.

Credit

Owners reporting that their credit needs were not met or that credit was harder to get are both at record lows. Nearly 40% said that all their credit needs met, and 55% were not interested in or needed credit.

Inflation

On balance, inflationary pressures are weak on Main Street as confirmed by government inflation reports.” -NFIB

Summary

It’s hard to argue that policy isn’t affect small business health. Both the trade war and immigration policy appear to be self-inflicted wounds. Both are acting to negate the positive tailwinds driving optimism. Until these are corrected, one would expect optimism to stand still

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Current Events

Latinos Lead in Launching Small Businesses

We’ve talked before about biases in hiring and banking, but sometimes there are good stories we can share about non-white people getting ahead. Latinos lead in launching new businesses. In fact, the rate of businesses launched by Latinos is nearly double that of Whites, Asians, and African Americans. In 2017, the rate of new Latino entrepreneurs was 0.5% vs. 0.3% across the other ethnic groups reported (Statista). Hispanic-owned businesses are up by 21% in past 4 years, and now, in 2017, they hit 4 million.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Foreign-Born Americans are More Entrepreneurial

Contrary to popular belief, or the propaganda and misinformation spewed as news, foreign-born nationals start business at a rate of nearly twice that of American born rate. In fact, “immigrants now launch more than a quarter of U.S. businesses. All entrepreneurs should welcome reform that would make it easier for this class of strivers to stay–and succeed.” (Inc).  

This really isn’t that surprising. The skills needed to be an entrepreneur are very similar to those needed to immigrate – risk-taking, resourcefulness, willingness to learn new things, adaptable to change, and the like. 

Immigration Equals, Job Creation Not Job Loss

Half of Americans are employed by small businesses. A quarter of those are launched by immigrants. Since immigrants start new businesses at twice the rate of citizens, immigration should equal net job creation. The myth surrounding immigration as bad for jobs is unfounded. New York City and our country were founded on immigration. Our values on entrepreneurship are based on this fact. We wouldn’t be the largest economy in the world without it. We hurt our own growth when we restrict entry to people who are more likely to help our economy than harm.  

Access to Small Business Capital is NOT Equal for Latinos

While majority Hispanic owned businesses employ roughly 2.7 million Americans and contribute over $700 million to the economy annually, they still struggle to gain the same access to capital as male, white business owners have. White business owners have more access to credit and financing than do Hispanics or any other ethnic group despite having equal revenue growth, employment growth and profitability.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Business Issues Current Events

Optimism Remains Strong Among Small Business Owners

Impeachment. Trade wars. The 2020 election. Tariffs. With all the uncertainty around these and other issues, small business owners remain optimistic about the future. Yet despite the optimism, almost 30% expect a recession in the near future, and nearly 7outof10 small business owners feel that the presidential candidate are not focused on small-business issues. To be fair, with all the noise and constant constitutional crises, there not a loooxygen left in the room. That being said, it is still a time that more are planning for growth than a recession.

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Small Business Resiliency is Hitting Hard

According to the quarterly Wells Fargo/Gallup Small Business Index survey, small business owner optimism continues to climb even in these uncertain times. It’s somewhat uncanny. This index measure both present and future optimism, and both were up.

The Small Business Index measure of optimism
The Small Business Index measure of optimism. From gallup.com

The index is a composite of factors currently affecting the business climate. Surprisingly, these rises come from modest gain across a wide range of factors, not just one or two. In fact, when asked about their personal outlook, almost 8 in 10 small business owners were more optimistic than pessimistic. This has held relatively steady across the year, apart from a second quarter dip to 70%. 

Small business owner’s confidence remains strong, even though their confidence in the economy has shown some signs of weakness. 63% said the economy was excellent or good, which is stable in comparison with Q2 and down 7% from Q1. A climate like this is often associated with growth and business stability

But is this optimism going to last?

Although small business owners remain very optimistic, their confidence in the overall economy has shown some signs of erosion. Sixty-three percent say the current state of the U.S. economy is excellent or good. While still strong, this is down somewhat from 70% in July’s Quarter 3 poll but on par with Quarter 2, when 63% rated the economy as excellent or good.

Notably, 1/3 of small businesses expect an economic downturn in the next 12 months. Roughly a third think a recession is somewhat likely, and about 27% say it’s not very likely. Owners generally say their business are tied to the economy as a whole, with 84% saying it affects them somewhat to a great deal. 

Contrary to what we’ve reported froother sources, 3 out 4 small business owners feel they have the right strategy in place to handle a downturn, and nearly 90% feel that they are at least somewhat prepared to handle a downturn that might occur in the next few years. 

Are We Seeing Complacency?

While this data is all extremely encouraging fobusiness like ours who serve other businesses. However, there are so many risk factors that are unknowable. With so much uncertainty about the future of the country, it can be hard to accept that 75% of small business owners truly have the right strategy and protections.

We’ve talked before about how the trade war is volatile, and it influences the economyPlus, a weakened Trump is apt to do something rash and drastic, and who knows what his social media will result in for the market or politics. Even global tensions like Brexit can be a risk fosupply chain disruptions. We don’t want to sound too alarmist, but the list is a long one. How could yoprepare when no one knows with any degree of certainty when or if another shoe is going to drop. That’s why I find this statistic the most concerning of all. 

2020 Election & Small Business Desires

There isn’t any real consensus among small business owners when it comes to politicsTaxes/tax relief always tops the list, but it is fairly low, with only 1 in 5 business owners reporting it. It’s not surprising, as a number of small businesses did not see the amount of tax relief the big businesses did from the 2018 Tax Cut and Jobs Act. Aside from healthcare, which was at 11%, all the other political areas were under 10% for small business owner fears.  Based on this information, there doesn’t seem to be any real hotbutton issues rising to the top. Maybe this is due to sense of complacency, or perhaps we all have different issue depending oour local environments.

marketing politics

An Optimism Killer for Small Business Owners? Finding New Business

Finding new business remains the top challenge for small business owners. This has remained relative flat for the year. Competition from larger companies and tight labor markets were the next two major concerns. They also remained relatively stable over the year.

Summary

While owners remain upbeat about their future, one can’t help to wonder if some complacency has started to set it. Small business owners share some concern about a recession longer-term, and most feel like they have the right places in place to manage it. With all the uncertainty swirling around, I find the difficult to believe, but I hope I am wrong. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Categories
Current Events

The Economy Is Cooling as the Trade War Drags On

The economy grew at an anemic pace of 1.9% in the 3rd quarter.  As the trade war drags on, American businesses are taking a financial hit. No one even really knows about whether a recession is likely or not. Not even startups and small businesses being spared. With the economy cooling after so much growth, what do we have to do to prepare for the future?

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Tariffs Have Increased the Cost of Doing Business

According to the 2019 Small Business Confidence Survey, small business optimism is starting to fall. Nearly 40% of small businesses have experienced an increase in cost due to tariffs.  Over half of these companies have increased prices to cover these costs.  As a result, nearly ½ of those businesses have lost revenue from the price increase. 

As the Economy Cools, the Trade War Gets Less Popular

According to the 2019 Small Business Confidence Survey, small business optimism is starting to fall. Nearly 40% of small businesses have experienced an increase in cost due to tariffs.  Over half of these companies have increased prices to cover these costs.  As a result, nearly ½ of those businesses have lost revenue from the price increase. 

The US-China Trade War is mostly just a fingerpointing campaign between two superpowers

There Are No Good Options

Many small businesses have faced tough choices since the beginning of the trade way in January of 2018.  None of which are great.  We touched on the impact of raising prices. Inventory stockpiling is risky given how we are governing by Twitter. Loans are problematic since the duration of the tariffs are unknown.  Every option increases either the cost to the business or the customer. At the center are politics involving China and more that no one knows what to expect in the first place. The trade war continues and we just have to witness it.

Nothing is Going to Change Until After the 2020 Election... at the Earliest

According to Forbes, the latest truce is a big nothing burger.

The US-China Trade War is one with finance, not with weapons

"a nothing-burger," said Scott Kennedy, who analyzes China's economy at the Center for Strategic and International Studies. "I call it the 'Invisible Deal.'... The only thing that happened Friday was that the U.S. delayed the tariff increase."

"It's curious that Washington and Beijing have not yet put this 'deal' in writing," said Wendy Cutler, a former U.S. trade negotiator now at the Asia Society Policy Institute. "That suggests that the details may not be worked out yet. If that's the case, we should expect more bumps in the road

Forbes

With the impeachment in full swing, the Trump administration is in a very weak negotiation position. Therefore, any deal that we will get is not likely to be a good one.  As a result, Congress will have little appetite to approve it.  If Trump survives and is re-elected, then if past is precedent, the uncertainty will drag on.  If not, then the trade war will likely end.  

In summary, the best we can do is to continue to ride out the storm.  Hopefully, the economy won’t go south before the trade war is resolved.  But every day it continues the risk increases. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Business Issues Current Events

Tariff Uncertainty Weighs on Small Businesses

Tariffs are important, particularly when it comes to trade negotiations. From the US to China to the EU to the UK and beyond, trade and tariffs are important factors in our political system. As we continue to wait for Donald Trump’s perfect trade deal, the Chinese import tariffs are taking their toll on small businesses, dimming the overall business outlook for the economy.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Economic Confidence Falls Among Small Businesses

Economic confidence is at its lowest level since November of 2012.  The monthly survey from the Wall St. Journal reported that 40% of small businesses expected the economy to worsen in the next 12 months, which is up significantly from the prior month (29%) and prior year (23%). 

The Reason? Tariffs.

Slightly less than half of the small businesses said that these tariffs are impacting their businesses. It’s not just the tariffs but the uncertainty that is rattling most owners. They don’t know how long these additional costs will remain.  They also don’t know what else is coming.  These together make it nearly impossible to plan accordingly.

The Ripple Effect

Less investment and slower hiring are the two most tangible short-term effects of this ill-conceived policy. 

“It’s hard enough to adjust to price increases, but it’s just more difficult when you are uncertain how the policy will unfold in the future,” said Richard Curtin, a University of Michigan economist. “For small firms that means being more cautious in your investment and hiring plans.” 

Supply chains are feeling the pinch. Customers are ordering less in advance. Fewer are making major purchases. 

“This is the strangest I’ve ever seen it,” said Wiscon President Torben Christensen, who has run the company for the past decade. “It’s busy. The economy is booming, but there is great uncertainty. A lot of it has to do with trade policy.”  

Small businesses can be more nimble, but they also have smaller cash reserves, making it difficult to deal with wild swings in demand 

“Travis Luther, the founder of Queen Anne Pillow Co., a Denver-based maker of high-end bed pillows, said larger competitors have accelerated purchases to get ahead of tariffs, something his six-year-old company can’t afford.”  

Price pressures limit the amount of excess cost that can be passed through to customers. 

Trump is clueless

Mr. Trump continues to reject the notion that his trade policies were hurting the U.S. economy. Instead, he blames the businesses as “badly run and weak companies”.  Neither of which is true.  Alternative facts and propaganda do not pay bills.  With impeachment in full swing, I wouldn’t expect his administration to get their act together anytime soon.  

What Can You Do?

So much of this is outside a small business owner’s control. However, there are a few things you can do.  First, is there anything you can do to increase demand through upselling, bundling, etc.? This can help you boost revenue can help offset some of the costs.  Second, is it possible to remove costs from your organization in other areas? This can help offset some of the increased cost of goods.  Finally, can you increase your price, even a little?  Any off-set is better than none. 

What we really need is stability, and unfortunately, I do not see that happening without a change in the Administration.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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Business Issues Current Events

Recession Talk Has Died Down… For Now

Consumer spending drives the U.S. economy, and for now, it seems to be holding off a recession. However, it may be plateauing, or possibly leading into an eventual downturn. The consumer confidence index was in the 120s for September and Consumer spending was flat in August. It looks like the economy is holding its breath as we deal with both impeachment and looming Chinese tariffs.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

The U.S. Economy Is Driven by Consumer Spending

Consumer spending makes up close to 70% of the Gross Domestic Product (GDP). David Geller, a behavioral economist, said “a 5% reduction in spending comes out to 3.5% of the U.S. GDP. This amounts to more than the projected GDP for 2019”. Therefore, we need to keep an eye on consumer spending as we enter the holiday season.

The Money Anxiety Index

Mr. Geller developed this index as an early warning signal for consumer spending. The index includes several economic factors to estimate the worry and stress consumers feel. This index has been around in 1959. 

Its historic high was 135.5, which hit during the major recession in the 1980s, and its historical lows were in the 1960s. The long-term average over this 60-year range was 71. This index has been shown to be a good predictor. For example, it predicted the Great Recession nearly a year before it was officially announced in December of 2007. 

So, Where Do We Stand?

The Index in September stood at 41.0, which is down since the bump-up in June, July, and August. Given, the figures are low and have ticked down, an imminent recession does not appear likely.

An example of our current recession possibility
Image: Money Anxiety Index

The down-tick in September matched with an increase in Michigan Survey of Consumer Sentiment index, reported to be 96.0. 

A second chart showing the possibility of a recession
Image: Michigan Survey of Consumer Sentiment

Summary – No Immediate Threat of Recession, but That Could Change

Based on the numbers, they do not indicate a recession is on the short-term horizon. However, given the impeachment inquiry and likely vote for articles of impeachment, in addition to the potential Chinese tariffs looming in December, things can change rapidly as we end 2019. 

Given all the uncertainty, it would be wise to keep our ears to the ground and keep an eye on both these indices in the months to come. While a recession may not be imminent, it’s not a bad idea to have some contingency plans.

Categories
Current Events Growing Your Business

Succeed During Downturns with These 4 Proven Tips

Just this summer, we were discussing how growth was challenging small business. A few bad policy decisions, and bam, now, we are looking at the real possibility of a downtown. But there are ways to succeed, even during a downturn.

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

1. Keep Cash on Hand

Make sure that you have enough cash on hand to cover two months of expenses. You should plan to have enough access to cash to manage a slump in sales. In truth, it is unlikely that you will have two months without revenue. If you avoid wasting your reserves, you are buffering yourself against a revenue shortfall of up to 16.67% of a year. This gives you enough to remain successful during an economic downturn, plus a bit more to pursue opportunities as soon as the storm breaks. 

2. Choose Your Customers Wisely

The last Recession still has effects that are hitting America over a decade later, and a new economic downturn could be just as bad

It may seem counter-intuitive to become more selective in a downturn. But, if you issue any credit, e.g. get paid after the service is provided, you need to make sure that the business you take on isn’t going to stiff you with the bill. It may be tempting to take all the business that you can during a downturn, but if your prospects aren’t serious, well-funded, and/or managed, it is a risk you need to be willing to take in order for success.

3. If Possible, Shift Your Mix into More Countercyclical Areas


While we don’t recommend waiting until you’re in trouble to hire a consultant, the reality is, most people don’t seek help if they don’t believe they have a problem. Therefore, our type of work tends to be somewhat countercyclical. Are there areas in your business where you can focus that are more recession-proof?

4. Don’t Be Afraid to Grow During Downturns

In every downturn, there are still industries that are successful. As long as you have a buffer, as discussed previously, it’s smart to invest if a strategic opportunity or hire comes along. There are plenty of bargains to be had if you are in a position to acquire them.

An economic downturn hitting the country might really change how our country is looking in 2019

Why Planning for a Downturn Will Help you Be Successful

We don’t know what will be happening throughout the rest of the year, or if a recession is likely. In the long-term, it is hard to say what will happen. But if you can keep a hold on your money and be aware of how to prevent issues before they happen, you make be able to get away safely.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Categories
Current Events

The US-China Trade War — What to Know About It

Small business confidence has significantly dropped to its lowest level since 2017. It’s now below where it was before the new tax cuts. Why? Concerns about trade, and especially concerns about the US–China Trade War. 

The effect of Trump’s trade war is starting to take its toll. According to poll sponsored by CNBC|Survey Monkey, there’s been a sharp uptick in the expectation of a negative impact from trade policies. But we didn’t need this poll to bring this to light for us. One import/export client of our Miguel has been experiencing concerns, and his story is a good example of how to navigate these trade concerns.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Miguel’s Story

Miguel operates an import/export business here in NYC. He does a lot of work with both Mexico and China. Both countries where uncertainty around trade policies have had a negative impact on his growth. 

“I export and import goods to both to/and from both Mexico and China. I don’t know what’s going to happen from week to week. It’s causing problems for both my suppliers and customers.” 

Miguel haactually seen demand for his US manufactured goods fall as well. He’s not alone. In September, Reuters reports:

An example of the deficit in trade that has led to this conflict between the US and China

The index of national factory activity dropped 1.3 points to a reading of 47.8 last month, the lowest level since June 2009, when the recession was ending. A reading below 50 indicates a contraction in the manufacturing sector…September’s reading marked the second straight month that the index broke below the 50 point threshold.

How We Advised Miguel

This is a very challenging environment for anyone in the import/export business. A trade war like the one between the US and China is hard to navigate. So what on Earth can you do? Due to all this uncertainty, any option contains risk. There is no easy solution. One more month of contraction, and the US manufacturing sector will be in a recession – so much for bringing manufacturing jobs back to the US.

Cut Expenses

The US-China Trade War is one with finance, not with weapons

Miguel’s business had been growing at a healthy rate, but in the past three months, that growth has slowed. There’s no reason to believe that any sanity will return to the trade policy area any time soon. In the short term, Miguel needed to cut back on some of his expansion plans, and limit his use of overtime. We also suggested looking at other ways to trim expenses.

Build Enough Inventory to Manage the Holidays

While the manufacturing sector seems to be trending towards recession, the consumer sector does not. He, like many others, was diverting his cash from spending to inventory building for the holiday season. It’s risky, as the consumer sector could head that way by Christmas, but better to have enough supply at the pre-tariff rates than have to rush order. Thankfully, Christmas is recession-proof, US–China Trade War-proof, and crime-proof

Explore Other Markets

This is easier said than done. Miguel’s connections are already established in both countries. But we have to be realistic. We decided to spend some money to research other markets unaffected by current trade policy. We began to look at Brazil and other South American markets as potential alternatives to Mexico, and Vietnam and other Southeast Asia countries as alternatives to China. We’ve made some headway, but this is slow and costly. 

The US-China Trade War is mostly just a fingerpointing campaign between two superpowers

How the US-China Trade War Trickles Down to Main Street

“That really bright outlook we saw two years ago has waned,” said Molly Day, vice president of public affairs for the National Small Business Association. “We’ve been pretty concerned with threats of tariffs.”  

Since Miguel is a distributor, he is like the canary in the coal mine. No one knows what the US–China relationship will result in, or how the trade war will play out. We are also concerned about the effect this will have on smaller retailers, as they are least able to absorb cost shocks. No matter what, it is a precarious time for sure.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.