How You Can Strengthen Your Business Against Uncertainty
It’s crazy to see how much can change in a year. Last year’s economic boom has now turned into a slowdown for a number of businesses this year. Skyrocketing inflation, increasing interest rates, and a looming recession have caused many to hesitate on spending discretionary income. And the flooring industry is especially susceptible to lower discretionary spending.
However, as long as you make preparations during these unsettling times, there’s no need to lose sleep over your business. One of the most important things you can do to prepare for an uncertain future is to “Sharpen the Saw.” Sales may not be coming in as fast as they have been, so you need to fine-tune (or sharpen) the other parts of your business. Improving in just a few small things can result in big dividends, when it comes to running your business in the most profitable and efficient way possible.
What can you do to strengthen and fortify your operation against a recession? I suggest you do two things: 1) Ensure you stay on top of your financial statements, and use them to influence your business decisions; and 2) Automate your operations as much as possible, so that you can run lean and efficiently.
Basically, you want to lower costs so you have more breathing room for the inevitable slower sales.
1. Stay on Top of Your Financial Statements.
I’m an eyewitness and have seen the importance of this firsthand. Years ago, my father owned a number of flooring stores. During the good years, things went well. Sales were coming in and showroom traffic was busy. Having grown up in the business, Dad knew how to promote, how to sell, and how to keep his customers happy – what I call the front end of the business (sales). He just struggled with the back end (operations and accounting). When business would slow, this weakness hurt him, until we made some course corrections.
As an accountant, I think of these different segments of a business like the different parts of a Profit & Loss statement. The topline section is all about Sales (Revenue). In a recession, your sales always go down–unless you're actively taking business (Marketshare) from your competitors–and you don’t have much control over that.
The next section of your P&L are variable costs because they go up and down with sales. They are called Cost of Sales (Cost of Product, Labor, Freight). What happens to these costs when you have inflation (higher Product prices), low labor participation rate (higher Labor costs), and extremely high gas prices (high Freight costs)? These costs are exploding for you, right? Just like sales, you don’t have much control over these costs under current macroeconomic conditions.
The last section of your P&L is the Fixed Expenses. They are fixed because they don’t change much from month to month. These are things like insurance, salaries, rent, and other General and Administrative costs. This is the area where you as an owner have more control. This is where you should start to look for places where you can “Sharpen the Saw.”
As an owner, you need to be able to make smart decisions, and accurate and up-to-date financial statements will help you do just that. Remember that if you are only using QuickBooks™ or generic accounting software by itself, there may be discrepancies due to the fact the flooring industry has very specific guidelines. To ensure your statements are as accurate as possible, please remember to transfer QPro’s front-end journal entries and reports into your accounting systems.
2. Automate Your Front-end Operations As Much As You Can.
When times get lean, you may find that you need to continue to operate your flooring business with fewer resources - human and financial. Implementing time-saving features of front-end POS software can help you do just that.
How is this possible? Ask yourself: “Am I fully implementing all of the ways QPro can help my business? “ Ensure you’re using all of QPro’s capabilities and features including tracking sales, job costing, managing inventory, transferring B2B product and vendor information, staying on top of commissions and sales tax, etc.
If you feel like you’re not using QPro to the fullest, we offer a variety of training options that can help your business utilize QPro in the most effective and efficient ways for your needs. Just give our support and training dept a call. We’re here to help.
When business is slower, it’s more important than ever to run things efficiently. Sharpening the Saw by cutting unnecessary overhead costs, and striving for operational excellence using good technology tools like QPro will help your business stay afloat and/or thrive. Use it to run your business tight and (if needed) lean, and use it to produce the financial statements necessary to guide your decision-making. I promise you if you do these two things, you’ll be setting your business up for success, regardless of what the future economy looks like.