PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Businesses Must Continue to Expect the Unexpected

By at 12 March, 2022, 11:20 am

SMALL BUSINESS INSIDER

 

by Raymond J. Keating –

How do you expect the unexpected? And how does a small business owner handle or prepare for unexpected, unknown, exogenous, or black swan – pick your term – events?

Consider what’s happened over the past two-or-so years.

Indeed, one could argue that a lifetime worth of black swans has been experienced. The COVID-19 pandemic hit, and has lasted, to varying degrees, for more than two years, with a massive loss of life and an economy that suffered from the pandemic and related shutdowns.

Supply chain problems and tight labor markets have raised costs, and stymied, undermined or restricted business operations and plans.

Red-hot inflation, which hadn’t been experienced in the U.S. in some 40 years, was ignited in early 2021, and has since taken hold. Costs have increased further as a result.

And last month, Russia, after long threatening to do so, launched a morally inexcusable, murderous war on the Ukraine. The devastation, especially in terms of loss of life, has been horrifying. And the people of Ukraine face the true dangers. But there are consequences that entrepreneurs in the U.S. must still confront.

Given Russia’s role in global energy markets, energy costs, already rising with inflation, have been driven even higher. For example, the average price of a gallon of gas at the pump went from $2.41 in pre-pandemic late January 2020, to $1.65 in late April after the initial pandemic hit, to about $2 in late November 2020, and then with inflation kicking in, rising to about $3.25 in late January 2022. And with the Russian attack and the world’s responses so far, the national average registered $4.33 a gallon as of March 11, according to AAA.  (See the following EIA chart on U.S. gasoline prices.)

How Can Small Businesses Prepare?

This unprecedented period of events raises a question for small businesses: How can entrepreneurs actually prepare for unexpected, unknown, exogenous, or black swan events? To say the least, there is no easy or pat answer.

Many analysts will say that small businesses must have at least a year’s worth of funding on hand to survive unknowns. For those small business owners who can do so, that’s ideal. However, many entrepreneurs who are struggling to keep their businesses aright during normal times will scoff or roll their eyes at such advice. One can hear the response of many: “Yeah, that would be nice, but…”

Strive for excellence, embrace change, build collaborative relationships. Most entrepreneurs that survive will do so due to the groundwork they previously laid regarding abilities to innovate, to pivot, to use the latest technology to increase productivity, to build deep and lasting customer relationships, to establish trust with their employees, to cooperate or establish partnerships with other businesses, to build a network of trusted suppliers and contractors, and to constantly be scanning for opportunities.

These are some of the key marks of a business that can excel in good or even tough times, and survive during economy-wide and/or global crises.

If you haven’t established such pillars during normal times, then the likelihood of being able to do so when black swan events hit is slim.

So, can a small business owner prepare for the unexpected?

Yes, by establishing an enterprise of excellence during normal or good times that will, in turn, increase chances for survival, or even for some growth, during times that might previously have been unimaginable.

Is any of this easy? No. And depending on the stage a business is at, perhaps establishing only some of such pillars is truly viable. But any progress in advancing each of these abilities remains essential and welcome.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

 

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