How can you, as an entrepreneur, think about the situation around the world?

Supply chain problems, raw material shortages and rising electricity and fuel prices have led to a troubled world economy, with rising inflation and rising interest rates. We are in a turbulent time where it is easy to feel uncertainty. In this article, we therefore give tips on how you as an entrepreneur can think about the uncertainty that prevails.

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Price and cyclical sensitivity

The price and economic sensitivity of your industry is one of the first things you should consider as an entrepreneur. Do you offer a product or service that customers will continue to use even if times get worse, or will you need to adapt your offer? The cyclical sensitivity of your business will also affect how price sensitive your customers may be if you need to increase your prices due to increased costs. If you sell a product or service that your customers are in dire need of, they will be prepared to pay more for it. However, if you operate in a cyclically sensitive industry, price increases can have a big impact on your demand.

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Plan long term

During a recession, it can become tense in both society and the economy. In such situations, it's easy to become reactive if you don't have a long-term plan to follow. Making adjustments and ensuring that the company's finances can withstand tougher times is of course important. Sooner or later, however, the economy will turn to boom again and if you then only adapt your business to the current situation, there is a risk that your company will fall behind the competition. Having a long-term plan and having the courage to stick to it also reduces the risk of making hasty decisions that can backfire at a later date. By planning for the long term, you give your company the opportunity to grow and develop in tougher times, and also to be well equipped to gear up even more when the economy turns up.

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Review your agreements

When interest rates and commodity prices go up, it's a good idea to review your contracts — both from suppliers and to customers — so as not to face increased costs while reducing revenue. Therefore, review your local and supplier agreements and see if you can bind the contracts for some time to come to avoid raising prices for them. Even if it would not be possible to bind the contracts, it gives you an overview of the potential cost increases you may incur, and you can then budget for these. Similarly, you should not lock in prices to your customers too much to give yourself the opportunity to be able to increase prices if your costs increase.

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Inventory and Liquidity

It is always good as a company to have strong liquidity to be able to pay debts in the short term. However, in times of recession, it is especially important to have a buffer in case you suffer increased costs, which is why it is good to start planning for how you can strengthen the liquidity of your company. Another tip is to review your possible inventory. If you have the opportunity, it can be a good place to replenish the stock a little more than you normally would have done. In this way, you can ensure that you have access to products or components that may run out at the supplier, as well as postpone the risk that your company will suffer from any price increases in the supply chain.

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Marketing

Many companies choose to cut down on marketing when there is a recession when they are pulling down on costs in general. While it may look good with reduced expenses in the short term, it doesn't have to mean that it benefits your business in the long run. If you choose to invest more in marketing when your competitors cut back on it, you have the opportunity to instead increase your sales and take additional market share. Something that will not only benefit your company at the moment, but also by giving you a head start when the economy turns up.

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Take the opportunity to adjust the business

When the economy of society is at its peak, it is easy to see between the fingers that things are not quite working or performing at the level that was intended. A recession can therefore be an occasion when it becomes easier to dispose of, or wind down, parts of the business that slow down others or involve more effort than good. By doing so, you can have more time and resources to spend on parts of the business that generate better returns. It can also be a good opportunity to diversify the activities of the company to find new sources of income and to spread your risks.