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It doesn’t matter where you live, what you do for a living or what purchase you are in the market for, the state of the economy is causing some concern. Inflation, rising interest rates and supply chain issues have become the trifecta for destabilizing the economy and making everyone a bit cautious.
In this uncertain economic climate, making business decisions is not easy, however turning to an experienced banking partner to help you navigate those decisions can be very helpful.
Financial institutions have been around for a long time, offering stability in decision-making and navigating uncertain times. Washington Trust Bank is celebrating 120 years of serving local communities. Throughout our 120-year history, banks including Washington Trust have experienced numerous economic highs and lows and weathered each storm. More importantly, they helped their clients navigate and survive the difficult years and stand ready for current financial events.
What can a business do now to stay ahead of any potential economic unease? Take the time to calculate the current cost of operating your business. In the midst of an inflationary market, it can be easy to overlook this critical step, especially if your customers are price cognizant.
Similarly, now is a good time to consider what are your core services and products versus what you could possibly cut to ensure you’re getting the best return on investment. Crunch the numbers to see which products have the highest demand, healthiest margins and are most profitable. Those are the ones to keep. If your business operates on small margins, you want to ensure you’re not doing more work for less, or even losing money.
Identify the strengths of your business and what sets you apart from competitors. For the tourist economy of Bend, there is plenty of competition, but also a wealth of services to offer. Make sure that what you spend boosts the strengths of your business and reduces other spending.
A place you can’t cut expenses is in supplies, especially for contractors. To help curb the pain of supply chain backlogs, diversify your vendors so you aren’t just relying on one company to get you what you need. Use domestic suppliers when possible if they deliver competitive pricing and quality products. If you still need to order from foreign suppliers, consider holding more inventory on hand to absorb potential supply chain disruptions. That may even mean renting a storage unit, but the added cost for storage may end up being much less than downtime or lost customers when needed supplies don’t arrive.
It may seem like now is a bad time to consider any renovation or expansion projects with rising interest rates on loans, and growing construction costs, but some perspective is warranted. In the late 1970s, interest rates on houses sat somewhere between 13 and 17%, yet projects still got off the ground and businesses still made money.
To move forward with any expansion, remodeling, or purchase, consider if a profit is still possible at a higher interest rate. If continuing still makes sense, there are ways to lessen the pain. Cut excess financing needs, lowering the total project scope, and ensure that every expense is justifiable. You should also work with your banker to put together a loan application. Give the lender as much information as possible, such as balance sheets, tax returns and a summary of why you need to borrow money. Surprises that pop up as a loan application is being reviewed will hinder the approval process.
It’s not a good time to take chances with your business or finances in an economic climate like this. Rather than taking chances, now is the time to develop an economic disaster recovery plan to help you get through economic times if they become more challenging. Protect yourself and your business and seek help when, or preferably before, you need it. We all want to see businesses make it through the hard times and come out ready to ramp up on the other side.
Cory Allen is senior vice president and team leader for Washington Trust Bank in Central Oregon.