In times of crisis, businesses of all size face economic challenges and confront uncertainty about their future. Engaging with experts like Ariel Romano, a senior business consultant, provides invaluable insights into astute management strategies for challenging situations.
Ariel Romano, a seasoned business consultant for large and medium enterprises, boasts a robust financial background and expertise in advisory services, business growth and smart risk management. With a diverse portfolio including roles as an entrepreneur, director across companies, CPA, and CFO in domestic and international firms, he offers insights into the actions that are essential for small and medium-sized businesses seeking to maintain effective operations amid the current crisis. “First and foremost, it’s essential to understand that the rules of the game have changed in the business environment. This holds true, not only for the current times of turmoil, but also to some extent, for the period before, when interest rates began to rise.”
What implications does this hold for businesses? What divergent actions are relevant today, compared to typical business climates?
- Understanding the new situation: We are currently in a new business environment, which means our entire approach needs to change. Transitioning from operating in a world with low, nearly zero, interest rates to rates between 8% and 10%, we need to recalibrate our entire business management and thinking. It implies that risk levels have changed, and therefore, caution is required for every transaction undertaken and must be thoroughly evaluated. This is because the returns are higher, as well as because the ability to secure more stringent funding, albeit with higher costs, is a reality. Take the real estate industry for example. In low-interest rate environments, the likelihood of a real estate crisis is lower. Conversely, in high-interest rate environments, the capacity to repay more stringent loans becomes more challenging. Property prices might drop, so rushing into real-estate transactions without meticulous examination is inadvisable.
- Beware of “opportunities“: If you hear of new and promising opportunities from sellers and acquaintances, exercise extreme caution. If the current price of a deal or purchase seems low, it might plummet significantly within a few months. This could indicate an enterprise with underlying issues that might impede its recovery. While opportunities do exist during market downturns and consolidation phases, there might be a fine line between a genuinely advantageous opportunity and a potentially bad or ‘toxic’ deal. Be extremely cautious when encountering such situations.
- Patience: In such situations, everything operates at a significantly slower pace. The timelines for securing funding, finding investors, bringing an investor into a company, or even finalizing new commercial deals lengthen. All these processes take much more time during these periods. Those with resources can afford to be patient and aren’t pressured to rush deals. It is more common for buyers to adopt a cautious stance, even when presented with exciting business propositions. Present-day investors conduct extensive due diligence and wait, expecting prices to decline rather than rise.
- Utilize any financial governmental aid available: It would be remiss not to consider what the government offers. There is probably something you can benefit from. When we’re uncertain at which stage we find ourselves regarding the security and economic situation—whether it’s the beginning, middle, or end—making any government assistance to businesses crucial. For example, Government Loan Guarantee Funds, institutional business aid plans, etc. You don’t have to take a loan, especially not one that is larger than needed, but you must at least investigate and prepare for it. Also, prepare for further economic tightening and assess what might be relevant in such a scenario.
- Roll up your sleeves: In times like these, everyone needs to be proactive and ready to do whatever is necessary to sustain an efficient and hungry business. Generating a collective effort within the organization to move things forward, regardless of role definitions in the company or their importance. Ensuring that everyone contributes a bit more. It doesn’t mean the organization should exploit the situation and add another 10 hours of work. That said, it’s often essential to reduce unnecessary tasks and expenses, reallocating efforts where necessary.
- Every penny saved is a penny earned: If you manage to save a dollar on something unnecessary, it’s the most profitable dollar you’ve earned. 100% profit. Review every expense – is it necessary right now? Can you stimulate competition among suppliers to secure more competitive pricing? Any savings you manage can be significant for the business’s economic stability.
- Time to get down to work: This connects us to the previous point: in a period of inflation, prices are rising, and, right now, this is happening worldwide. Both interest rates and loan repayments are increasing. You might not necessarily be able to pass on these price increases to the customer, so you need to check where you can cut back or “downgrade” certain activities. For example, if you usually buy Pink Lady apples to the kitchenette, you can buy different apples and save around 50%. In this way, you can scrutinize every service, purchase, or subscription you spend money on. You can receive simplified experience that matches your needs, at a significantly lower price. The wisdom lies in re-adapting the business’s actual needs to the level of service required in this period.
Smart business management.
