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Some businesses face industry-specific challenges that must be factored into their daily management.
Virtually all industries face similar risks, including labour shortages and rising interest rates. However, other factors can also potentially harm businesses—with consequences that are more serious and more prevalent in some industries.
Construction
Manufacturing
Retail business
Tourism and food service
Construction
Increased input costs
Nowadays, your planning should reflect the fluctuating prices of raw materials. A months-long project may incur a steep rise in costs as it progresses. When signing contracts, be sure to include a clause that allows you to adjust your rates to reflect cost changes.
Supply chain uncertainties
You also need to guard against delays caused by a lack of raw materials or distribution problems, since penalties can affect the profitability of each of your projects. It’s very important to record all your activities, including dates, suppliers, cost changes and any problems you’ve encountered.
Transportation
Materials transportation is another segment of your business that you should factor into your calculations. Your business could be affected by rising fuel costs and other increases driven by inflation or border issues.
Rapid rise in demand
While falling demand for your services can obviously be detrimental to your business, so can demand that rises too quickly. You need to approach this carefully. If your order backlog is growing and you don’t have the resources to deliver, you could well lose your business.
Project accounting
Analyzing your costs and expenses by project can be crucial to optimizing your operations and boosting your profitability. It will give you a clearer picture of your most and least profitable projects. Better knowledge of your data will enable you to make wiser choices and focus your efforts and resources on the type of offerings that work best for your organization.
Senior debt
You need to take a step-by-step approach to paying off your debts. If you’ve not paid your main suppliers for a long time, you risk losing or tarnishing your relationship with them. What’s more, a supplier could claim payment directly from your clients, thereby preventing you from receiving money you are owed.
What’s more, a continuing rise in some senior debt (such as taxes owed to the government) is a sign of serious difficulties that you should heed if you want to turn things around.
Manufacturing
Supply difficulties and input costs
Difficult access to raw materials and delays caused by labour shortages can affect your ability to deliver promised products.
What’s more, if you’re not careful, the fluctuating costs of materials could cause cash flow issues and eat into your profit margins.
You need to take these factors into account when setting your prices and drafting contracts that allow you to adjust prices when needed and avoid penalties for delays.
Transportation
Materials transportation, fluctuating fuel costs and changing border standards are just a few variable factors. You should guard against them by implementing measures that will give you a degree of flexibility when difficulties occur.
Supplier and customer diversity
Being overly dependent on a single supplier may spell trouble in the near future. Consider lessening this dependence by building relationships with other partners or by switching to local suppliers, for instance. It may also be worth expanding your customer base if that is relevant and profitable for your business.
Productivity analysis
A manager’s involvement and experience can make all the difference to a business’s profitability. How well do you know each facet of your organization’s productivity? For example, are you aware of what causes delays? Are you up to speed with what’s going on in your business?
Automation
Automating various activities in your business is necessary to remain competitive in your market. But it’s also a well-known solution to labour shortages. Is such a technology transition being planned or implemented in your organization? It could help you mitigate some difficulties.
Undercapitalization
As an entrepreneur, you should make sure you have access to sufficient funds before continuing your activities, changing your ways of doing things, or planning a new project or expansion.
Inventory management
Effective inventory management can be a major factor in any business. Make sure you carefully assess this aspect of your business. Whereas insufficient inventory can be detrimental to your business, excess inventory can also lead to a significant cash flow shortfall.
Retail business
Online sales
Retail was one of the industries hardest hit by the pandemic. In addition to facing labour shortages and higher tariffs, businesses are having to adapt to a rapidly changing market.
Online sales almost doubled between 2016 and 2021—a trend that’s here to stay. Businesses that have yet to do so will have to invest in an online store. If they are relying on an external supplier, it’s essential that they track results to guide their initiatives and maximize their site’s reach.
You must know all of your online sales details. This, for example, would allow you to make monthly comparisons of sales and costs by product type, including shipping and returns, as well as handling and transportation costs.
Accounts payable
You must have precise knowledge of your types of payables. It’s also vital to cultivate good relationships with your suppliers.
Procurement and inventory management
Continuously track your inventory, by category, to efficiently manage your inventory and reduce your warehousing costs. It’s important to receive your orders at the right time of the season.
Transportation
Transportation uncertainties may become an issue that justifies shifting your approach. For instance, you could rely more on local production rather than importing.
Inflation
Of course, consumer purchasing power, which is heavily shaped by the economic context, may warrant a change in your business model or approach.
Rent
Rent is a major cost for retail businesses. Maintaining a good relationship with your landlord is crucial. A landlord who is made aware of your reality could prove a valuable partner when negotiating agreements—such as payment deferrals—that will ultimately benefit both parties.
Tourism and food service
International tourism
The upturn in international tourism is good news for some businesses but it can lead to a drop in traffic for organizations that rely more on local customers. It may be wise to review your forecasts.
Input and resource costs
Raw material and resource costs are on the rise. Your business should increase its prices accordingly to maintain a profit margin that keeps it viable.
Accounts payable and senior debt
You must keep a close eye on your accounts payable, and determine their breakdown and priority. How far behind are your account payments and what type are they? Growing senior debt, such as wages, payroll deductions and taxes, is an alarming sign of financial difficulties. You must address the situation urgently to find solutions.
To help you see things more clearly, your business could benefit from the support of an expert in business management and recovery. The sooner you take charge of your difficulties, the greater your chances of successfully tackling these major challenges.