Answers to Four Common Questions Business Owners Have in 2022

It’s time to break out the crystal ball to see what 2022 has in store for business owners. Will this year finally bring us relief from coronavirus in its many forms? Will taxes go up? Will inflation go down?

Here are the four most common questions that keep business owners up at night—and our advice on how to get a better night’s sleep:

What is the Ripple Effect?

The “ripple effect” occurs when the normal flow of business is interrupted and affects every stage downstream. The ripple effect can be found in labor, supply chain, and inflation (to name a few areas of concern).

You need to ask, “what will the ripple effect do to my business?” Every time you read a business article, listen to a podcast or watch a webinar, use the ripple effect to connect the dots on what is being said to your business.

Inflation in China? What does that mean for my retail business in Chicago? Coronavirus outbreak in India? Will that hurt my company in Indiana? The quick answer may be “no,” but if your wholesalers or partners do business in those countries, it could harm your business.

Tip: Play the “What If” game with your business to spot potential ripple effects. For example: “What if my wholesaler’s supplier has to shut down due to the pandemic. How will it affect my business?” Or “What if I own a landscaping company and my customers get hit by a natural disaster? How long will my projects be delayed? Am I caught up with Receivables?” Your answers to all the “What If” questions could make the difference between getting knocked down in business versus getting knocked out of business.

Will the labor shortage continue this year?

The quick answer is yes. But depending on your business, there are options for dealing with a smaller labor pool.

Can you automate any part of your operations, like customer service or inventory control? This would allow your employees to focus on your company’s priority areas. Can you outsource any part of your business? This option also helps deal with having fewer employees.

Tip: Have you tapped into new sources of labor—retirees, friends and family, parents returning to work? One way to find new employees is by offering them the opportunity to work remotely. It is now a competitive advantage for business owners and a reward for employees.

When will my supply chain get back on track?

Probably not as soon as you would like it to be. Everything is backed up! Container ships are sitting out at sea, trucks sit in parking lots waiting for drivers, and shelves sit barren waiting for products.

Tip: This is a painful example of the ripple effect. To counter that, we recommend that you look at alternative options for sourcing materials or buying goods this year. The closer to your home base you can find them, the better your chance of minimizing the ripple effect.

Will Inflation Go Down in 2022?

According to the Federal Reserve, it should, but not right away. They plan to raise interest rates three times this year to combat skyrocketing inflation—last November’s rate was the highest in 39 years.

The first increase is planned for March, which means higher interest rates on everything from credit cards to lines of credit.

Higher inflation creates higher variable costs for your business. Gas, shipping, materials, and so on will be more expensive this year. Until we can control coronavirus, supply chain, and labor issues, inflation will continue to hover above the 5% rate, when ideally, we would have it under 2%.

Tip: Assume higher variable costs in the first half of this year. If they turn out to be lower, your company has better cash flow. If not, you won’t have to deal with negative cash flow because you built higher costs into your plan.

If you have other pressing questions, we would love to hear them and help you develop solutions to better navigate your business through the uncharted waters of 2022. Contact Yeo & Yeo today.

Information used in this article was provided by our partners at Sage.