It’s Time To Get Smarter Or Die
Hard times are coming. Small business owners in Trinidad and Tobago and eventually the Caribbean must prepare. Street vendors feel it first. One vendor who operated for years in Mayaro reported that she no longer goes to Mayaro. She sold kids clothing and underwear for men and women, her weekend sales dropped from $6000 a weekend, to about $2000. That was before the cost of transporting her goods from Chaguanas to Mayaro. She did what vendors do best; she moved her business to Tunapuna.
Let’s face it if you are a small business owner and you think that the oil crisis will not affect you, then you should get your head examined. You are crazier than Crazy. Today, in the back of every small business owner’s mind are two questions.
1. How will the low oil prices affect my business?
2. What can I do to prepare?
Let’s answer the first question. T&T lavish economy has been supported by the Energy Sector for the last 25 to 30 years. A lot less foreign exchange will come into the country’s monetary system. Less foreign exchange means that first the country will be stretched to pay the high food import bills, high ticket foreign products like automobiles will be a thing of the past. A lack of foreign exchange may even affect carnival.
The reality is that 80 percent of our goods come from foreign. It is only a matter of time before the supplies we now have are depleted. At that point if supplies cannot be replaced locally, the business is in trouble. Simultaneously, consumer demands will be for more essential goods and services. Consumers will start making lifestyle adjustments for the lean times. This will immediately affect the bottom line of most retailers with foreign good.
It is only a matter of months before symptoms will start appearing. Stores will begin to close their
What Can Small Business Owners Do?
Let’s start with what we know. We know that…
1 The economy will take a downturn in the near future. Evidence is the plummeting price of oil and the uncertainty of the new government being able to manage without increasing taxes and changing regulations that could possibly affect small businesses.
2, The Budget: Our new government led by Prime Minister Keith Rowley have PNMManefesto Here
3 Consumer Demand determines what sells. If you do not provide an essential product or service your business will be the first to feel the reduction in spending power. People will take care of their survival needs before spending money on none essentials.
At this point, we do not know if our government will have to go begging, cap in hand, to the IMF with promises of self imposed austerity.
But here is the reality. As small business owners in a small country, we know that what the government does affect the country, it will affect everyone, not just you. The difference is what you do in your business to ride out the upcoming economic downturn. You can wait until you it hits you or start preparing now.
First think strategically, answer these questions.
· Where are you in terms of your business?
· What are your profitable products or services?
· How profitable are they?
· What is the turnover rate of your inventory?
· How can you manage without foreign exchange?
At this point, the relationship you have with foreign suppliers will be crucial to your survival. The predictions are that oil prices will stay low for the next 2 years. Can your business survive for two years without foreign exchange?
It could, if you prepare.
There are a lot of questions you need to answer about your inventory and profitability. Most retail business owners carry a variety of retail items unaware of the profitability of each. Inventory is a major expense to any retail business, control this and you will control a significant part of your business.
Start with an inventory audit
Count and cost every item of inventory. Date inventory, the intention is to know what you have and to consider drastically reducing the price of stale inventory. This will be harder to do when demand falls.
Second, you need to figure out what it takes to operate lean. Lean, meaning; what will it take for you to operate at the barest minimum cash flow and investments? Fixed expenses like rent/lease are untouchable but you may be able to shave off small savings by examining your phone, and other utilities. Your biggest savings however will come from examining your operating expenses such your employee’s compensation.
Employee payroll represents a significant recurring expense to the business. This may be your last resort but your preparation should consider each position. You may discover redundancy that can be assigned to another employee with increased compensation. Alternatively, you can adjust the working hours to focus on periods where activity peaks. For example, instead of opening the store at 8 AM open at 10 AM saving two hours or introduce part time work if there is a need to hold on to dedicated employees. Each man hour you save will reduce your expenses by the number of employees you currently have.
The worst thing you can do is stick your head in the sand and say you are not in the oil business; oil fuels your business. Here’s why it is important to you.
The writing is on the wall for those who want to see. It says that we are headed for turbulent times. As small business owners we need to be proactive, ride the waves or wait on them to crash into your business.
While you still can access foreign exchange, you may want to consider cutting cost by making arrangements with your regular suppliers to make purchases online instead of flying to Miami or New York City.
It does not matter if you are a retailer specializing in specific goods like ladies shoes, men’s clothing, electronics, cell phones, furniture or you carry a large variety of merchandise; you need to prepare.
Retail stores are built on the idea that the more you have the more you are able to sell. It is also true that the more you have the more you end up losing. Each inventory piece was cold hard cash.
One of the biggest mistakes small retailers make is to rely on hope. They hope customers will visit