Small Businesses: Start Preparing For 2022 Now
The last two years have been challenging for small businesses. Actually, challenging would be an understatement, it was a bloodbath for the most part.
While governments around the world forced small businesses to shut their doors, most big box stores were allowed to stay open without having to close for a single day.
During the last 18 months, mega-corporations, both brick and mortar and ecommerce, saw meteoric growth, while tens of thousands of small businesses closed their doors forever. It wasn't fair what happened to them, but hopefully some hard lessons were learned and pivots were made that have made the surviving small businesses even stronger.
If you're a small business owner that's still alive and kicking, I commend you as it seems like the powers that be were rooting for you to fail.
I recorded some previous videos when it came to operating during the pandemic, with most of the successful ones I know being able to shift their business to online selling fast to counter the forced closures they faced.
Today, I want to talk about 2022, and how in some ways it's going to be just as challenging for small business as it has been over the last 18 months. I want to talk about some things you can, or really, should be doing now to position yourself for 2022.
2022 is going to present a whole other list of challenges for small business owners, but hopefully some of these tips will help you navigate the murky waters ahead. And before I start, sorry to come off so doom and gloom, but us small business owners are not out of the woods yet.
#1, Prepare For Supply Chain Challenges
You probably know about this one very well, both personally and from a business perspective. Supply chains are failing for a whole host of reasons and business owners need to adjust their strategies accordingly. I ordered a furniture set back in March, 2021, I am being told if all goes well, I should have it right after Christmas this year, but I'm being told to be prepared for even longer delays.
The cost of a shipping container to get goods from China to the western ports of the US, has gone from $2,000 a container to over $20,000 a container. Shippers are bumping planned cargo in favor of whoever can pay them the most. Not only that, but the cargo ships are having to wait several weeks off shore just to unload their cargo……and then, it needs to reach its final inland destination, which is presenting an entirely different set of challenges.
The point is that what used to take a few weeks to get here from China, now takes several months or even more. And it's not just China, supply chain issues are happening all over the world right now. Even domestic products here in the US are having a hard time making it to distribution centers and to retailers.
So if your business depends on inventory, start ordering well ahead of whatever timeline you used before. Shipping costs are not coming down anytime soon and these challenges are not going away anytime soon, so be prepared to order early and to pay more for your goods if you want to have things to sell next year.
#2, Plan For a Lack of Inventory
So this one goes along with the supply chain problems, you need to really plan and get creative with your inventory. I work with retailers who are being told by their suppliers, they will not be shipping again to retailers until March or April next year, so whatever inventory they have on hand right now will have to last them until then. And this is from domestic sources.
Lack of labor and intermittent shut downs over the last 18 months have made it very difficult for factories to get products out the door. So if you can get your hands on inventory now, or are able to place an order, I highly suggest you do it now rather than later. The labor shortages are not going away anytime soon, at least not in 2022, so expect inventory to be hard to come by.
Some creative solutions retailers we work with have been doing are to expand their product and brand lines beyond what they usually carry. If you find new brands and product lines that can supply inventory and they are a good fit for your business, go for it. Consumers are getting desperate for products, so many are not as choosy when it comes to a specific brand.
Also, look for other other businesses looking to liquidate their inventory. It's not a pleasant way to source inventory, but there are probably businesses all around you closing their doors forever. Offer a fair price for their inventory and add it to your stockpile. One of our clients did this with another businesses they were friendly with two towns away, they purchased their entire inventory when they closed and doubled their own inventory in the process.
#3, Prepare For Inflation
Inflation is on a tear in 2021 and experts predict it will peak sometime in the first half of 2022. The cost of everything is up and you've seen this from the cost of raw materials, utilities, products as well as shipping.
Big businesses can better absorb shocks to the system like this but small businesses have a hard time dealing with these cost increases without having to pass it all onto the consumer.
And this presents many challenges, like creating price disparity between small businesses and their larger competitors who may be able to hold prices steady for a longer period of time. It also eats away at profit margins and cash flow fast, leaving less resources and wiggle room to take do things like increase inventory levels.
The best hedge against inflation right now for small businesses is to buy what you need now, in todays dollars, instead of waiting next year when that price could be 20%-100% higher than they are right now. If you have the funds to do it, purchase whatever you need for 2022 now.
#4, Prepare For a Potential Commercial Real Estate Crash
If you lease commercial space, this could either be an opportunity or a potential danger for your business.
While the last 18 months saw real estate prices skyrocket, commercial landlords were left paying for properties where most of the tenants were closed, with many tenants not paying rent for most or all of that period.
So not only have small businesses been hurting, many commercial landlords, especially the smaller ones, have been hurting just as bad.
So if you're in a shopping center with a high vacancy rate, not only will you be receiving less foot traffic normally enjoyed by a fully leased shopping center, but you will also have to carry more of the common costs tenants have to share since there are now less of you to share the bill.
So make sure you look over your lease again to really know what your liabilities and protections are. A landlord may be pushing more expenses onto you than your lease agreement allows, or you may have special clauses if the shopping center is below a certain vacancy rate.
This may also be a great opportunity to re-negotiate your lease for better terms since new business startups are down due to the pandemic.
#5, The last one is To Prepare For a Possible Recession On The Horizon
If you watch the news, read the papers and listen to the government, they all tell you things are rosy. The stock market and real estate markets are at all time highs, consumer spending is skyrocketing, and everything thing is just great.
The last time things were going this well was in 2007, and we know how that ended, with an economic freefall that took several years to recover from. Inflation is out of control, supply lines are collapsing and consumer confidence is low. A crash is coming, it's just a matter of when.
Don't get caught flatfooted when it happens. Make sure you are keeping funds in reserve for unforeseen expenses and being smart how you spend your money right now. Invest in things that will help you in 2022, not things that will become meaningless expenses.
Think about the things you can do if business declined by 10%-30% next year, what actions can you take now that can help position you to overcome this scenario? Even if you can't do anything now, at least have a plan in place if this worst case scenario does happen.
So these are 5 things to prepare for in 2022. The best thing you as a business owner can do now is to prepare for the worst and be happy if 2022 isn't as challenging as we thought.
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