As businesses recover from the pandemic-fueled events of the last few years, as well as grapple with the uncertainty of today’s economic climate, entrepreneurs are likely to feel cautious and unsure of how to plan for the success of their businesses going forward. After all, how can you plan for something you don’t know is going to happen?
Mistakes may be made and line items may be missed, but thoughtful planning is still the best way to ensure your business continues to thrive in uncertain times. As business leaders themselves, the members of Young Entrepreneur Council have given extra consideration to the issue and below share particular expenses every CEO should budget for this year and why doing so is extra important during this time.
1. New Hires
Given the current situation, it’s the best time to hire. Many companies are laying people off, and there is a chance that good talent is available out there. Either they were let go or are fearful they’ll be next. Now is a good time to go and reach out to really good talent. – Daniel Martinez, treble.ai
2. Employee Engagement Experiences
With so many things perpetuating negative news, and the hybrid work environment limiting quality face-to-face time, CEOs should invest time and energy in deepening the human connection between team members through in-person gatherings. Ongoing efforts to bring people together can help cultivate a happy and healthy workplace. Let people engage with each other outside of the office. Laughing, sharing personal stories and conversing outside of daily “workplace” topics strengthens the connection between team members, which will help increase productivity and overall retention. In essence, it’s a friendly reminder of the importance—and benefits—of human connection. – Steve Gentile, Pinpoint
3. Cost-Of-Living Raises
Cost-of-living raises are going to be more important than ever this year. One of the biggest reasons why people leave their jobs is for a pay raise, and with inflation where it is, keeping your wages competitive is going to be key if you want to avoid employee turnover. – Diana Goodwin, MarketBox
4. Crisis Management
Given the current economic climate and the events of the last few years, I think it’s important for CEOs to budget for crisis management this year. No one can predict when or how a crisis will hit, but if you’re prepared, it can help minimize the damage. This could include things like having a solid communication plan in place, having funds set aside to cover unexpected costs or having key personnel trained in emergency response procedures. By planning ahead and being proactive, you can help reduce the stress and chaos that a crisis can cause. – Kelly Kercher, K3 Technology
5. Product Development
Product development expenses are still very important for CEOs, even in an economic downturn. Investing in product development can give a startup an invaluable advantage over its competitors. By continuing to innovate and improve its products, a startup can differentiate itself from other companies and gain a competitive edge. Furthermore, investing in product development can help a startup emerge from an economic downturn in a stronger position. By continuing to develop and improve its products, a startup can attract new customers and retain its existing ones, helping it to grow and succeed in the long term. This is not different from previous years; product development has always been an important expense for CEOs, regardless of the economic climate. – Chenyu Ren, Markai, Inc.
In tough times, you often see people cut their marketing budgets. This is counterintuitive because it is crucial for people to know that you are still in business during tough times. It is essential that people understand you are still around and you are still working. So my suggestion is to go ahead and make sure you have a marketing budget for 2023. If you’re not sure what to keep, it might be wise to use the spend on email marketing specifically. – Zane Stevens, Protea Financial
Cybersecurity is an important consideration for businesses of all sizes and of all industries, and the Covid-19 pandemic has only increased the need for robust cybersecurity measures. With more and more employees working remotely, there is an increased risk of cyberattacks, and companies need to be prepared to protect their systems, data and customers from these threats. This may be different from previous years in that the Covid-19 pandemic has created additional challenges and risks when it comes to cybersecurity, such as the increased use of remote work and the potential for new types of cyberattacks that are related to the pandemic. As such, it is more important than ever for CEOs to prioritize cybersecurity and allocate the necessary resources to protect their businesses. – Olufemi Shonubi, EduTech Global
8. Financial Planning
During tough economic times, it’s even more important to invest in good financial planning. If you have a CFO, lean on their advice to guide you through the next few years in a way that balances growth goals with cash runway. If you do not have a CFO, invest in a solid financial model for your business with upside, downside and medium-case scenarios built in so that you can adapt to whatever the future brings. – Andrew Powell, Learn to Win
9. Losses And Late Payments
Indicators point to a global cost-of-living crisis, which means purchasers cutting back on spending is to be expected. Although not typical business expenses you would budget for, losses and late invoice payments are crucial to account for for survival in tough economic times. Losses occur when a company cannot generate enough revenue to cover costs. This can be due to various reasons, such as the loss of clients due to competition from larger companies or economic recession. As expected, payments from clients may be delayed. Budgeting for this in advance is a good way to shield the business as it weathers the storm. Both of these things are more common in tough economic times, so CEOs need to account for them, particularly this year. – Tonika Bruce, Lead Nicely, Inc.
10. Customer Retention
Every CEO should allocate at least 13% of their budget to customer retention programs. With the fears of a coming recession, more and more clients are cutting down on expenses and subscriptions that may affect the baseline of many businesses when happening en masse. For this reason, customer retention is different from previous years. To reduce this problem, offer customer loyalty programs. Extend subscription durations for the same price or provide additional discounts and package it as an offer so that customers stay with you. Give your customers the option to pause billing or their subscription, rather than cancel, for a limited time. Remember, the costs related to customer retention are always lower compared to customer acquisition. – Brian David Crane, Spread Great Ideas