Many of the concerns small business owners have now are about how they
can stay afloat after the COVID-19 pandemic. Here, Bryce Sanders
explains how changes to the market might affect these clients and what
you can do to help them navigate the recovery afterward.
“This time it’s different.” Some say these are the four most dangerous
words uttered on Wall Street. Here is another concept: “People like
the familiar and the comfortable.” Your client who owns a local
business might think the COVID-19 pandemic is over and business can
get back to the way it was in 2019, but there are some major factors
that indicate this time, it really will be different.
Hiring personnel. Many businesses have a “We Are Hiring” sign in their
window these days. Your client might have one in theirs, too. They
might assume that once financial support from the government ends,
people will be back on the street looking for work.
How it was: Labor was like electricity: You paid for the amount you
used. Your client might have had a pool of employees whom they could
schedule at a moment’s notice or send home midday if the business was
slow. There was no shortage of employees.
This time it’s different: Many people left their jobs during the
pandemic. Employers like Amazon went on a hiring spree, offering
attractive pay and benefits. Now, employees want a set schedule each
month, as well as competitive pay and attractive benefits.
Access to capital. Over the last two years, your client might have
seen new buildings going up, old properties getting renovated and
property prices reaching record highs and wondered, “Where is all that
money coming from?”
How it was: Interest rates were low, and borrowing was cheap. Private
equity firms had pools of capital looking for a home. Property owners
got plenty of cold calls asking if they wanted to sell it. Your client
might have been thinking of expanding.
This time it’s different: As interest rates rise, the window of
opportunity closes. Higher interest rates mean the projected rate of
return on projects needs to be higher to attract capital. The lenders
or individuals considering putting money into your client’s business
will want a better deal or more security. The longer your client
waits, the tougher it will be to arrange new financing.
Supply chains. Because of supply chain issues, customers now must wait
for order fulfillment, pay more, or accept substitutions.
How it was: Several vendors knew what your client needed and competed
to provide it. Your client could play them off against each other and
beat down the price. Just-in-time delivery and free shipping were the
This time it’s different: Many inputs your client uses came from
overseas. Factories may be back in business, but shipping costs
ballooned in the meantime. These costs are being passed on to the
customer, your client. They will need to line up alternate suppliers
closer to home.
Business taxes. This is your specialty. You help your client pay only
the amount they need to pay to different levels of government.
How it was: Your client put aside money for payroll taxes and property
taxes. You kept them current with their filings. The tax code had
stayed the same for a while. You helped them take advantage of the
incentives the government offered.
This time it’s different: The government handed out a lot of money
during the pandemic. They will look at the PPP loans that were
granted, expect repayment in some situations but also work to track
down cheaters. (Your client should be safe.) The government will find
ways to raise taxes on businesses.
Price competition. If your client owns a restaurant, they endured a
long period of closure. Once they reopened, they might have pushed
prices up and blamed inflation.
How it was: Your client knew what their competitors were charging and
were able to align their cost of inputs plus pricing to make some
profit. If prices rose, they might have absorbed those costs for a
while to prevent the loss of customers.
This time it’s different: Your client is getting hit by rising wages,
energy costs, shipping costs, and raw material costs. Prices have not
leveled off. Customers have expected prices to rise but are pushing
back or buying less. Fortunately, online shopping has opened the door
to your client’s market to the whole world. Are they taking advantage
of this opportunity?
Inflation. It has been low for years. We got used to two percent
inflation. Unfortunately, nothing lasts forever.
How it was: When inflation is two percent or less, prices remained
stable. Wages did not increase that much. The cost to borrow was low.
Unfortunately, so were guaranteed interest rates on savings.
This time it’s different: Your client’s labor costs will need to at
least keep up with inflation, otherwise, they will lose employees.
They will need to determine what level of price increases they can
pass along to customers without large scare defections. They will need
to determine how much of the cost increases they can absorb and for
Interest rates. This cost was low. Borrowing was cheap. Banks liked to
lend at variable rates because it reduced their risk. They made money
on the spread.
How it was: Your client was fine with variable rate debt because
interest rates were low. They might have borrowed aggressively.
This time it’s different: No one knows how high-interest rates will go
or how long rate increases will continue. Variable-rate debt is an
open-ended problem for your client. They should convert variable-rate
debt to fixed-rate debt as quickly as possible. Ideally, they should
pay it off, but that might not be possible.
Retaining customers. Whenever prices increase your client loses
customers to competitors. People become price-conscious.
How it was: Your client’s business probably has or had a core group of
loyal clients. However, some clients probably left when money got
tight. While some may have returned when lockdown ended, many still
This time it’s different: Your client needs to absorb some price
increases to retain customers or develop a loyalty rewards program
that incentivizes them to shop at their store. Otherwise, if price
increases are passed directly to consumers, they will shop around for
Your business-owning client has endured a couple of very difficult
years. Unfortunately, it is probably going to get a lot harder because
of inflation. They need your business planning expertise to develop a
strategy to move forward.