José Luís González Rodriguez is a Partner of ActionCOACH Spain, as well as a mentoring and business consulting expert.
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The economy is always evolving and, as a result, it suffers from cyclical pathologies. Preventive medicine is needed to alleviate business closures, layoffs and property losses.
In addition to transmitting forecasts on macroeconomic data (which are sometimes not very comforting), economists perform other, little-recognized roles, participating in the implementation of preventive and palliative actions to overcome the difficult economic situations that the economy presents us with. Whether in the role of entrepreneurs, executives, managers, advisors, consultants or teachers, economists have the important job of providing modern techniques, systems and methods for business management that allow us to face current situations, reduce collateral effects and create a solid foundation for modernization, thereby making companies more competitive.
Based on my background in economics, I want to share four tips for entrepreneurs to face this stage of inflation with as little impact as possible:
1. Be flexible.
We are experiencing a time of change because of the globalization of markets and the digital revolution. What works today may stop working in a short period of time. The only thing that doesn’t change is change. Today there is a new paradigm of business management based on the need to innovate, rethink the business and adapt to new demands that are, in many cases, far removed from the current situation. I believe the companies that will survive will not be the most capitalized and profitable; they will be the most flexible and agile in the face of change. While it may not come naturally, it's important for entrepreneurs to adopt this new thinking model.
2. Take a hard look at your budget.
Now is the time to make rigorous use of the business tool that is the budget. For companies that do not use a budget, it's a good idea to create one. For those that already have a budget, it’s time to focus on the item of revenue. Consider launching commercial actions that allow you to increase prospects or potential clients, examine your conversion rates and the number of repeat purchases and look for ways to increase the average purchase. There are hundreds of possible strategies to improve the revenue side of the budget.
On the other hand, you'll want to work to reduce expenditures, so that you can keep the profit figure fixed. This allows you to be highly flexible and adapt to undesirable circumstances that arise, such as the current inflation situation.
3. Stay on top of money owed.
Another important point is to keep an eye on the company’s treasury, which may now be affected by late payments and possible defaults, leading to a high-risk situation. The last person to be paid is usually the least insistent, but it's important to have a rigorous treasury management policy to make sure you're not losing out on what you are owed.
4. When you can, buy in advance.
Finally, in times of inflation, it often makes sense to adopt a new purchasing policy whereby you negotiate the purchase volume with suppliers and ensure price stability over time. The best investment now is to make advance purchases of bullish-trending supplies.
Hope sees problems, big or small, as opportunities for improvement. Let us unite hope with action so that we can face the challenges and succeed in the face of inflation.
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