Companies may want to slim down their workforce, keeping only the most productive staff and examine supplier agreements to make sure they’re getting the best deal possible.FG Trade/iStockPhoto / Getty Images
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To survive these challenging times, business owners need to evaluate their operations strategically, be nimble and adapt rapidly to changes, and be ready to take advantage of any new opportunities that arise, advisors say.
One good aspect of this environment is that all businesses are facing these difficulties and searching for ways to manage, says Darren Coleman, senior vice president, private client group and portfolio manager with Coleman Wealth at Raymond James Ltd. in Toronto.
“There is actually a bit of a reward for those who are willing to adjust the fastest right now,” he says. “Business owners should be embracing change, accelerating and trying different things but not getting too wedded to one idea because they might have to adjust it pretty quickly.”
Mr. Coleman advises his clients to seek out business coaching as well, particularly as many got into business with a particular skill such as sewing clothing, being a great painter or technician – and they may need to brush up on certain business skills to navigate this environment.
“Find a really good coach to teach the things they need to learn really fast,” he says, instead of learning through trial and error.
“They still have to be competent in how they add value to the customer, but they’re now going to have to develop other muscles or goals that are really going to be key.’”
For example, do clients understand the metrics of their business, how to maintain margins, control costs, and overdo efficiencies, he asks.
“They’re going to have to become better business owners as best they can.”
He also says this is a great time for innovation and businesses may see new opportunities if some of their competitors are struggling. That can include partnerships or joint ventures. It could be time to expand their community and seek out inspiration from a variety of sources.
Rising costs are hitting Canada’s small businesses hard, particularly as the economy emerges from COVID-19-related restrictions, says Simon Gaudreault, chief economist and vice-president of research at the Canadian Federation of Independent Business (CFIB).
The CFIB’s research has found that the average COVID-19-related debt for the country’s small businesses is $160,000, and they don’t have the capacity to handle additional debt to manage rising costs.
“It’s also a situation in which 62 per cent of businesses in Canada still have pandemic debt, and 54 per cent are still in a situation where they’re making subpar revenue compared to the last pre-pandemic year,” he says.
“We’re still in a situation where a lot of businesses on Main Street are not back yet.”
And their capacity to raise prices to deal with higher costs is limited, he adds.
Mr. Gaudreault says the CFIB is lobbying governments of all levels to reduce the cost burden on small businesses by cutting Canada Pension Plan premiums or payroll and other taxes, holding off on mandatory sick days, and delaying carbon price increases. The CFIB also wants the government to improve the foreign temporary worker program so it can help alleviate the current labour shortage businesses are facing.
Focus on cash flow and trimming the workforce
Jennifer Schurer is experiencing this challenging business environment from both sides – as an owner and service provider in Ottawa. Her company upSpace helps companies rent available event space and her business, Schurer Solutions, provides virtual bookkeeping services to companies across Canada.
“My clients are facing the same struggles as me. So, when prices go up for gas or food, it’s not something where I can all of a sudden increase the prices on my services to clients,” she says.
“They’re feeling the same pinch. It just boils down to less discretionary income every month.”
She has been advising clients to look closely at their cash flow, ensure they have access to a line of credit in case that’s needed, and examine what government subsidies they can utilize.
Companies may want to slim down their workforce, keeping only the most productive staff and examine supplier agreements to make sure they’re getting the best deal possible.
She says businesses should focus on their best clients. And, it’s the same with advertising, only spending on those platforms that get results.
“Focus on what services are the most lucrative in terms of your profit margins and getting rid of clients that might not be as good of a fit as originally thought,” particularly if they aren’t actually bringing in a profit, she adds.
Defer costs and speak to creditors
Heather Holjevac, certified financial planner and founder of Holjevac Financial Group, a fee-for-service practice in Mississauga, says once all the costs of the business have been figured out, then it’s also time to examine what costs can be deferred.
Looking for more local suppliers who can offer better service can also reduce costs and increase efficiency, she says.
“You have to step back and do an audit of the company and look where there’s leakage and put a plan in place to manage [current and] future downturns,” she explains.
Ms. Holjevac also points to talking to any creditors or lenders to try to negotiate better terms as many view receiving some payments as better than getting none.
“A lot of people underestimate the willingness of creditors to either extend or reduce payments,” she says. “As long as the business owner is willing to explain the situation to show they have a plan.”
On the labour front, she says organizations can look at government hiring programs. For example, those that help you hire youth, students, or co-op university or college students.
For current staff, find ways to be the most flexible with a hybrid work arrangement that will encourage staff to stay.
“Try to adapt and figure out new ways of doing things,” she says.
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