How You Can Bolster Your Business Against Uncertainty
It’s crazy to see what a difference a year can make. Last year’s economic boom has now turned into a slowdown for a number of businesses this year. Rising interest rates, skyrocketing inflation, 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 ambiguous 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 operation 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. Keep 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 consistent and showroom traffic was busy. Having grown up in the business, Dad knew how to sell, how to promote, and how to keep 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.”
While the flush of business during the pandemic helped some business owners get away with just “winging it,” they won’t be as lucky when things slow down. 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.
2. Automate Your Operations As Much As Possible.
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 software can help you do just that.
How is this possible? Are you fully implementing all of the ways QFloors can help your business? For example, we've found that those who implement our software have been able to save significant amounts in accounting fees from your CPA. QFloors produces all the reports you need automatically. You only need your CPA to file the income tax return. In addition, we find most medium to larger businesses who are fully utilizing QFloors save a lot in wages.
During the terrible recession years of 2007-2012, industry reports indicated that between 20-25% of flooring stores went out of business. Yet during that same time frame, only 3% of companies that were actively using QFloors software went out of business. That’s a pretty significant difference. So you should always make sure you are using QFloors to its fullest potential. 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.
If you feel like you’re not using QFloors to the fullest, we offer a variety of training options that can help your business utilize QFloors 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 QFloors will help your business stay afloat and/or thrive.