Launching a new venture or expanding your current enterprise takes business sense and a smart approach. Taking on either during a tight economy requires persistence and a willingness to adapt. New businesses or growth typically need capital and during higher-interest-rate periods you may have to work harder to access capital that fits your business. As a result, you may need to revise your business plan to help you build resilience to outlast your competition.
Capital Is the Lifeblood of a Small Businesses
Whether you are an entrepreneur who is kicking off an idea or a seasoned business owner who is looking to expand, you know capital plays a significant role in building and keeping your business running. And loans are a vital source of capital. However, a few factors are changing today’s lending landscape for small business owners.
Higher Interest Rates
The Federal Reserve has raised interest rates 11 times since March 2022 — the fastest pace of tightening since the early 1980s. And rates are likely to remain high through 2024, meaning entrepreneurs may face new challenges in accessing capital that fits their business plans.
Increased Costs of Doing Business
Ongoing inflation also means business owners should prepare for rising costs in all areas of business operations[1] These increases could come from higher interest rates, supply chain challenges, or increased labor costs. These costs can quickly become a burden for new or established businesses looking to grow. In an ever-changing landscape, it is essential that a business plan can evolve and be updated in response to these challenges.
Stay on Track with Your Goals
Higher interest rates and increased costs can have a compounding effect on a business. For example, if your business relies on loans to cover cash flow shortages, revising your business plan to reduce costs in other areas might reduce your financial burden. Reviewing your business plan can be an opportunity to realign your day-to-day activities with your business’s overarching goals and help you identify activities that are no longer supporting your goals.
Finding a longer-term solution, such as reducing expenditures, could help your business in the long run and reduce the pressure on your team. From a big picture standpoint, reviewing individual details and considering how each aspect of your business plan affects one another, as well as is affected by the current economic landscape, can help your company stay on track.
Regularly Review Your Business Plan
Doing research up-front when starting or growing your business in a tight economy is essential, but your analysis won’t end there. If, for example, your business faces significantly increased costs from a supplier, you may research new supplier options and compare quotes for the best price. The same notion works for comparing lending options in a high-interest-rate environment. You should be shopping around for the best loan options.
What's Next
Supplier and lending changes affect your products and services, marketing strategies, and financial plans, for example — all of which are part of a business plan — so scheduling regular check-ins to review and update your business plan can make sense as you navigate changing dynamics. Staying flexible and adaptable as you approach and manage complexity is just one way to stay sane as you start or grow your business.
