How Small Business Owners Cope in Uncertain Economic Times
Filed under: Small Business
With 92 per cent of small businesses closing in the first few years of business, those who own a business are looking for ways to remain open and thrive. One of the ways to do that is to manage costs and even taking a few risks.
According to the American Express Small Business Monitor, 47 per cent of small business owners prefer to invest in customer and employee loyalty. They would prefer to keep customers even if that means reducing profitability by not increasing prices.
"Small business owners see their employees as critical to the success of their business, and their customers as the lifeblood of their franchise. We can now see even more evidence of this mind set in challenging and unstable economic time," said Eric Nielsen, Vice President & General Manager, Small Business Services Canada, American Express Canada in a release.
"What's very interesting is that instead of jeopardizing employee or customer loyalty when it comes to managing rising costs, business owners' initial inclination is to absorb the challenges the economy poses and respond by making changes to mitigate these difficulties and improve their cost efficiency."
While small business owners would prefer to absorb increased financial costs such as the price of gas, travel and insurance without passing it on to the customer, there are times when those increased costs must be added to the price of goods. What the survey found is that while business owners aren't fond of increasing prices and losing customers, it's how they approach the issue.
"What we found is that small businesses are very active and are quick to adapt to the changes that come their way," said Nielsen. "Half of them have switched buyers to get better pricing."
If that doesn't work, then the small business owners who successfully increased their prices and didn't lose customers made the process palatable to the customers. This meant explaining the reason behind the price increase, extending payment terms and offering discounts for paying early.
Risk-wise, small business owners are willing to try things that will improve their business but not at the cost of losing customers. These risks include switching buyers, negotiating costs and even looking at alternate fuel and transportation costs.