The Small Business Guide To Surviving Soaring Costs

It is an understatement to say that small businesses, with their remarkable resilience, have been on a wild ride since 2020. From the pandemic to significant supply chain disruptions to dramatic increases in inflation, they have navigated with precision and ingenuity, inspiring admiration for their survival.

With labor shortages and high prices, it’s not just a good idea but a necessity for small businesses to operate as lean as possible. Since small businesses often operate with a razor-thin margin, it’s crucial to learn how to create bigger buffers in cash flow.

Applying lean management principles will help small business owners create more value for their customers with fewer resources.

We will focus on the first three lean principles to implement

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Defining Value

The value of anything in the marketplace relies on consumer demand. What is a consumer willing to spend on your product or service? When the economy gets tight, and there are dramatic changes in other areas of a consumer’s life, that’s when the first economic principle kicks in. People make tradeoffs. When things get tight for consumers, they turn a critical eye to what they spend money on and if it’s still worth it for them to do so. The problem? What the consumer cuts may very well be your product or service out of their spending budget.

As a small business owner, part of your job is anticipating consumers’ reactions to economic changes. To gauge whether your product or service will survive, you should take a scalpel to your business and ask yourself questions like: Are our customers getting what they need? Are we delivering what we promise in a timely way? Have our customers’ buying habits changed for the product or service that we offer? Are there any other product or service types that we can add that make our core offering of higher value?

86% of customers state that good customer service turns them from one-time shoppers to lifelong brand champions. There is nothing more crucially important during times of economic downturn than having consumers who are brand champions; they will be loyal.

Value Stream Mapping

Although this type of mapping is largely used in manufacturing operations, its principles will work when you are trying to visualize how all of the pieces of your operation will function together. Visualizing how you deliver your product or service will help you eliminate bottlenecks and tension points.

You don’t have to spend 1,000 hours on VSM. Simply map out how you see your business delivering your product or service from beginning to end and include the employee functions as well. You want to build a simple visual of the current state, ideal state, and future state visuals to help you understand how you are delivering value today, what your perfect delivery system would look like, and what the future of your operation looks like when all components run smoothly.

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Create Work Flow

Now that you have mapped out how everything is functioning, how you would like it to function, and what the future of your business looks like, you can work on the specific workflow that goes from one process to another.

This is important because business inefficiencies cost money. It is estimated that 20% to 30% of revenue loss in business operations is due to inefficiencies annually.

When money is tight for consumers, you can’t afford to not deliver on your promises, and you certainly can’t afford to lose money because your business operation needs to function correctly.

Whenever the economy is unstable, it helps to have a plan and ensure that you can run a business that is a revenue-generating machine that continues to deliver value to your customers.