Is it Spring Yet? | SBDC UNF

Is it Spring Yet?

Plant in a lightbulbAstronomically speaking, the vernal equinox occurs when the Sun crosses the celestial equator on its way north along the ecliptic. This happened on Sunday, March 20th at 11:32 am in the Northern Hemisphere.

The economy, like our gardens, is starting to blossom again, with consumers reappearing in many business sectors that had seen diminished sales as a result of the Covid virus. Small businesses must nurture those consumers carefully, just as our gardens must be fertilized, watered, and weeded if we are to reap the type and yield of crop we desire. Here’s a light-hearted look at “consumer gardening.” Just as the weather has a big influence on how our gardens perform, the economy has a large impact on how well our businesses are doing. The good news is that signs of spring are here:

The Multiplier Effect

Unemployment is at historic lows and, although it fluctuates from month to month, shows no signs of rising. This is good news because of the “multiplier effect.” Every dollar that is earned in payroll will circulate more than once in the economy. An example of this is when a newly re-employed person buys lunch out several times a week. This produces additional revenue for the restaurant, which in turn buys more food products. The food supplier then purchases more from their wholesaler who in turn orders more from the farmer. Meanwhile, the server in the restaurant earns more in tips and, in spending that money, adds to the ‘snowball (rolling downhill) effect’ that results from the multiplier.  At some point, as each business’s sales increase, they will have to create new employment themselves, starting the same process all over again. While this is oversimplified, you can see how one simple act of purchasing causes increased economic activity all the way down the supply chain.

Despite the many news articles about the perils of inflation, the economy has experienced inflationary cycles in the past, and ultimately monetary policies have been adjusted to reduce and contain its effects. While inflation increases prices, it has not shown any evidence of reducing consumer demand or confidence. Given that monetary policies will be adjusted to contain inflation to an acceptable annual level, having a degree of inflation after a long flat period can in its own way stimulate the economy. Retired individuals with pensions that adjust for inflation will see an increase in their purchasing power as will those with savings as interest rates rise. The rising value of the real estate will allow some owners to realize capital gains when selling, and although some potential homebuyers will be priced out of the market, opportunities will be created for entrepreneurs and businesses to develop rental and lower-income properties, creating more jobs as a result of that process. As a result of all of these activities, the “multiplier effect” will once again increase their impact and the overall economy will strengthen further.

Along with increasing temperatures and hours of daylight are increasing numbers of festivals and events. Those events are drawing locals out of their homes and attracting both in-state and out-of-state tourists. Every dollar spent will boost the economy, even the dollar spent on cotton candy or popcorn for the children will be “multiplied” and contribute to the economy.

4 Rules to Consumer Gardening

However, good weather alone will not make our gardens grow. Gardeners must follow some basic rules that apply to business as well.  These are:

  1. Plant the right crop – In gardening, the crop planted must be a fit for the climate and for the soil. Cabbage, lettuce, oranges, and bananas all have different needs and must be grown in the appropriate geographic location. It is interesting to note that climate change is affecting where some crops will prosper. In business, the product and service mix must be a fit for the demographics of the area. Those demographics tend to change over time as the population ages and as new residents move in. Technology and social trends also influence consumer needs and want. Watching trends, surveying customers, and analyzing the competition can help you determine the right “crop mix.”
  2. Water and fertilize as needed –Seeds will not propagate unless watered and fertilized, and leads will not turn into sales without follow-up and good customer service. Just as fertilizer will increase crop yield, advertising and consumer incentives will increase sales.
  3. Weeding and pest control –Weeds will try to creep into a garden and draw off the fertilizer and water, and pests will try to eat your crop before you can harvest it. Gardeners pluck weeds at their first sign and use everything from fences to scarecrows to keep pests away. In business, the weed might be the person trying to “put their hand into the till” and draw your money away. That might be a “loose-fingered” employee, a shoplifter, or a vendor’s delivery person who shorts the order. Good internal controls will prevent those occurrences as accounting systems, processes, and security are upgraded. The pest trying to eat your crop is the competition trying to usurp your customer. Focus on having a compelling competitive advantage and good customer service will mitigate that issue.
  4. Rotate your crops at least annually –Just as the soil becomes “tired” and needs re-nourishment, so does the consumer market in general. Keeping things “fresh” and “exciting” for the consumer will increase the potential of them returning. Just as auto manufacturers, clothing companies, furniture manufacturers, and restaurants change their offerings periodically, so should small businesses. Even supermarkets and big-box retailers who have the same basic products over time will change the store layout to provide a “fresh” experience for the consumer. You can introduce new products or services periodically or offer some items on a time-limited basis. McDonald’s does not have the McRib sandwich on their permanent menu, but rather offers it as a time-limited product periodically. That has resulted in a high volume of sales and product sell-out whenever offered. There may be similar things you can do in your business.

Business Springtime Activities

Traditionally, the vernal equinox also signals the time of Spring cleaning when people cleaned out their houses and freshened them up. Business owners can also undertake some springtime activities, for example:

Cleaning

There are both physical and cognitive activities that should be undertaken to “freshen up” the business and put it into a position where it can adapt to current market and economic conditions in a way that will allow it to prosper and grow. The physical aspects of cleaning begin with the part of the business that none of your customers see, the backroom or the warehouse where you keep your stock. Spring is a new season, and if you have either seasonal merchandise or items time-limited by expiration date or consumer demand, NOW is the time to convert them to cash. Holding onto them is of no benefit, their value to customers will decrease as the season change, expiration dates approach, or consumer desires change. You can hold sales, return items to distributors, sell them on the Internet or at a flea market, or sell them to a liquidator. The important action is to convert them to cash to invest in items that will sell in the upcoming seasons.

Planning

Once the business is in a position to grow, a direction must be set and measurable goals should be established. To paraphrase Lewis Carroll’s Alice in Wonderland: If you don’t know where you want to go, you won’t know which road to take. Worse yet, you won’t know if you are on the right road, and won’t recognize your destination when you arrive! An annual operating plan, whether a complete business plan or a few components of it like a marketing plan and a financial plan is essential if you want to be successful in 2022.

Fixing

Just like things at home that wear out and break down, components of your business may require fixing to enable you to fulfill your plan. Obviously, any equipment you own that is not up to par will fall into this category. Technology falls into this category as well. The technology category encompasses items like links on your web page. Nothing says ‘poor management as much as a web link to a catalog, spec sheet, or the like that does not work. Check your e-mail accounts to make sure they are not bouncing back customer e-mail due to full mailboxes or poorly set spam filters. Ensure that any e-mail received is promptly responded to. Your company’s image is an important part of your business as well. Updating your logo, business cards, social media postings, and signage are other ways of increasing the visibility of your business.

If you attend to the spring actions that will improve your business’s performance, you will be able to achieve higher profits which will lead to a bountiful harvest!

If you are a business owner and seeking assistance with your business with our 18 counties, complete our Request for Consulting Form, and one of our client intake specialists will contact you to schedule an appointment with one of our business consultants.

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