The year is about to enter the last quarter and many small businesses are hoping consumers will not tighten their belts. Usually, October is the beginning of the shopping season. But the ongoing trade dispute between the United States and China are worrying small business owners.

Eyes are nervously focused on the world’s two largest economies. Each country is hitting the other with punitive tariffs. The list of products is getting longer and more are added to the pipeline each week. Everything started with the steel and aluminum tariffs until it deteriorated into a full-blown trade war.

Thus, with this changing market environment, small business owners and entrepreneurs must brace for the consequences. Depending on which industry you belong, the tariffs might have a direct or indirect impact. Those that can adjust smartly can counter the effects and still realize profits by yearend.

Ways a small business can cope with the changing market

The real threat to small businesses is the higher cost. Business operators want to them as much as possible. However, the additional tariffs could prompt the supply chain to raise costs.

If that should happen, there is no remedy but to pass on the burden to customers. That is disastrous because sales and revenue are likely to decline. Thus, the small business needs to strategize. The business plan needs to be revisited to address pricing concerns. But what is more important is to find ways to manage cash flows efficiently.

• Stay focused on profit margins

First and foremost, don’t lose sight of your profit margins. Evaluate and determine the costs that your business can absorb. The next step is to prioritize the cost that must be covered.

In case your expenses on some of your supplies increase due to tariffs, study how you can reduce expenses. Any cost-cutting measure can offset the higher cost of goods.

Also, you won’t lose anything if you can renegotiate your supply contracts despite the rising costs. Don’t panic and rush the decision to raise your prices. Exhaust these options before seriously considering any price increase.

• Review your pricing strategy

Whenever the cost of doing business increases, price hikes usually ensue. This is the easiest way out for business owners to keep the business afloat and stay profitable is raise prices. However, such a move can drive customers away and impair revenue.

The best way to address this issue is to revisit your pricing structure. Understand it and compare your prices with business rivals. You can also gauge whether your customers value your products despite the price increase.

But bear in mind that your customers have spending limits. For as long as your pricing is reasonable and product quality is maintained, the influx of customers will continue and your business will remain strong.
 

• Guard your inventory levels

During crunch time, strictly monitor and manage your inventory levels. Efficiency is the key especially when costs are rising and uncertainty persists.

Always check your supplies and provisions. Avoid stocking up on slow or non-moving goods and items. Remember that the timely purchase and replenishment of inventory can result to savings. It is also helpful for liquidity purposes.

Bright light for small businesses

Based on data from the U.S. Commerce Department, consumer spending reached an all-time during the second quarter of 2018. The increase in consumer purchases was driven by a strong labor market and improving the finances of consumers.

Although market observers are hoping for a speedy resolution of the trade disputes, they believe consumers will eventually adjust to the changing market. Consumer spending which makes up about 2/3 of U.S. economic growth is rising. Therefore, small businesses will continue to thrive and remain relevant even during the most trying times.

If you want to know more about how your small business can grow by leaps and bounds, visit www.pdmcapital.com. You can join a network where business success is the definite outcome.