Business owners, big and small, are facing a challenging economic landscape, with soaring inflation, slowed sales growth, and a looming recession. These uncertainties could impact the very core of their operations. As the struggle to maintain profitability intensifies and the labor market remains tight, offshore staffing services have emerged as a strategic solution that has proven to be a lifeline for businesses seeking resilience and growth.
In this article, we explore the key challenges small businesses face, including the impact of inflation, hiring difficulties, and economic pessimism. More importantly, we shed light on how having an offshore team can emerge as a viable strategy to weather the storm and thrive in the midst of adversity.
Business Outlook for the Year
Small business owners are currently wary of the future due to inflation outpacing revenue expectations and indications suggesting a mild recession in the US economy during the first half of 2024. Their key concerns include:
- Inflation remains a top concern for small businesses, with 23% of owners reporting it as their single most important problem in operating their business.
- Unadjusted, 13% of owners reported lower average selling prices, and 41% reported higher average prices.
- Small business owners are pessimistic about future business conditions, which has contributed to low optimism regarding the economy.
- Sales growth among small businesses has slowed, and the bottom line is being squeezed, leaving owners few options beyond raising selling prices for financial relief.
- A survey conducted in July showed that 52% of small business owners believed the economy was already in a recession, down from 55% in April.
- Economic growth has cooled during the current quarter from the torrid 5.2% pace of Q3, and many experts now predict a significant slowdown sometime during the first half of 2024.
- Small businesses are having difficulty filling open jobs, with 93% of businesses hiring or trying to fill open positions reporting few or no qualified applicants.
These challenges have led to a dimmer outlook for small businesses, with just 25% saying the economy is in good health, according to the U.S. Chamber and MetLife, which co-sponsored the survey conducted in October. Despite some loosening in recent months, the labor market remains tight for small businesses, and inflation is still cutting into profits.
Strategies to Mitigate the Impact of Inflation
Inflation is unavoidable and what businesses can do is to lessen its impact. Here are some strategies businesses can use to cope with the impact of inflation:
- Raise prices strategically: Small business owners can raise prices to hedge against inflation, but it should be done in a way that will not drive customers away. Prices should be raised slowly in modest increments and be strategic, choosing areas where customers are less likely to notice.
- Negotiate long-term, fixed-price contracts: Consider negotiating long-term, fixed-price contracts with suppliers and customers so that external inflation does not have as much of an effect.
- Streamline and automate processes: Reorganizing the company’s warehouse and exploring automation for time-intensive work can save money and combat the rising cost of labor.
- Look for new streams of income: Inflation may put a damper on regular operations, but small business owners can look for new streams of income. As a local business owner with assets like property, equipment, inventory, and staff, they may be able to find new ways to generate revenue.
- Reduce business expenses: Small business owners can reduce overhead costs and variable expenses to combat inflation. The more affordable the expenses are, the more cash can be put toward replenishing inventory, improving the customer experience, or creating a cushion for emergencies.
- Be ready for new customers: Inflation automatically creates new customer segments, so small business owners can go after them.
- Monitor economic indicators: Small business owners should monitor economic indicators to stay ahead of inflation and adjust their strategies accordingly.
Of the seven strategies, reducing business expenses is the least dependent on other factors. Thus, it is the strategy that you as a business owner have the most control over. However, reducing business costs is easier said than done.
How can businesses reduce costs during inflation?
Reducing costs is a good idea, in theory, but businesses may find it daunting to accomplish. The government knows this, which is why the Inflation Reduction Act (IRA) was signed into law.
Small business owners can reduce their business expenses during inflation by taking advantage of the Inflation Reduction Act (IRA) signed into law by President Biden.
- The IRA helps small businesses by investing in deficit reduction to fight inflation over the years, increasing manufacturing, and lowering healthcare costs.
- The legislation also lowers the cost for businesses to invest in clean energy and energy efficiency, which can help small businesses save on energy costs.
- The IRA also includes several tax credits and exemptions that significantly reduce costs for households and businesses that make eco-improvements to their properties and vehicles, and make upgrades to solar and heat pumps.
- Small business owners can also reduce their expenses by maintaining lower healthcare costs, supporting energy-saving investments, and bolstering supply chain resiliency.
Another option for business owners is to avail themselves of offshore staffing services. Offshoring is the practice of relocating a business process from one country to another, typically to access lower labor costs, additional skilled labor, or establish a business presence in a foreign country.
Your offshore team can be involved in various business processes, such as manufacturing, accounting, or technical and administrative services. Businesses can create an offshore team through outsourcing arrangements with third-party providers or by establishing business structures in the new location.
How can small business owners take advantage of offshoring?
Small business owners can take advantage of offshore staffing services in several ways to enhance their operations and reduce costs. Some of the benefits of offshoring for small businesses include:
- Cost Efficiency: Offshoring enables businesses to tap into regions with lower labor costs, helping reduce operational expenses and increase overall cost efficiency.
- Access to Specialized Talent: Offshore staffing services provide access to specialized talent that may not be readily available locally, allowing small businesses to benefit from specific expertise and skills.
- Increased Efficiency and Productivity: Offshore team members can help increase efficiency, save money, and enhance productivity, allowing small businesses to focus on revenue-generating tasks and business growth.
- Cost-Effectiveness: Offshoring can offer more competitive pricing than onshoring, leading to cost savings for small businesses.
By leveraging offshoring, small business owners can access a broader talent pool, reduce operational costs, and improve overall business efficiency. However, it’s important for small business owners to carefully consider which offshore company to partner with to maximize the benefits of offshoring and ensure a successful integration of offshore resources.
Why partner with iSupport Worldwide?
iSupport Worldwide is a leading offshoring and outsourcing company that connects businesses with top professionals in the Philippines. This is significant because English is the official business language in the Philippines.
English is also the standard language of instruction in the Philippines, resulting in a significant population of proficient English-speaking professionals.
With iSupport, you can take advantage of the Philippines’ diverse cultural influences, robust higher education system, and high rates of literacy that contribute to a workforce that is receptive to international work environments.
Additionally, iSupport focuses on business relationships beyond business transactions, which allows it to source available talent within your budget and fits your company culture.
Thus, a partnership with iSupport Worldwide enables you to expand your talent pool, decrease operational expenses, and enhance overall business efficiency.
Conclusion
The business outlook for small businesses in the United States is currently challenging, with concerns such as inflation and the potential for a recession affecting operations.
To mitigate these challenges, small business owners can adopt various strategies, including raising prices strategically, negotiating long-term contracts, and exploring new income streams. Additionally, the recently enacted Inflation Reduction Act (IRA) provides support in addressing inflation-related issues.
One specific avenue for reducing costs is through offshoring. A partnership with iSupport offers cost efficiency, access to specialized talent, and increased overall business efficiency.
In the face of economic uncertainties, strategic planning, and innovative partnerships, such as with iSupport Worldwide, are crucial for small businesses to navigate challenges and emerge stronger.
Are you prepared to face challenges of the economy and grow your business?
Click here for a no-obligation consultation to find out if offshoring can help you reduce expenses, enhance efficiency, and thrive despite economic uncertainties.