As businesses recover from the pandemic-induced events of recent years and grapple with the uncertainty of the current economic climate, business owners are likely to feel cautious and uncertain about how to plan for their company’s future success. After all, how can you plan something you don’t know is going to happen?
Mistakes can be made and line items missed, but thoughtful planning is still the best way to keep your business thriving in uncertain times. As business leaders themselves, the members of Council for Young Entrepreneurs have taken a closer look at the issue and share below certain expenses that every CEO should budget for this year and why it is especially important during this time.
1. New employees
Given the current situation, now is the best time to hire someone. Many companies are laying off people and there is a chance that good talent is available. Either they’ve been let go or they’re afraid they’ll be next. Now is a good time to 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 the quality of face-to-face time, CEOs should invest time and energy in deepening the human connection between team members through face-to-face meetings. Continued efforts to bring people together can help cultivate a happy and healthy workplace. Let people interact with each other outside the office. Laughing, sharing personal stories and conversing outside of everyday “workplace” topics strengthens the bond between team members, which will help increase productivity and overall retention. Essentially, it’s a gentle reminder of the importance and benefits of human connection. – Steve Gentile, Check
3. Increases in the cost of living
Cost of living increases will be more important than ever this year. One of the biggest reasons people quit their jobs is for a pay rise, and with inflation where it is, keeping your wages competitive will be critical if you want to avoid employee turnover. – Diana Goodwin, MarketBox
4. Crisis Management
Given the current economic climate and the events of recent years, I think it’s important that CEOs allocate money for crisis management this year. No one can predict when or how a crisis will strike, but being prepared can help limit the damage. This includes things like having a solid communications plan in place, setting aside funds to cover unexpected costs, or having key personnel trained in emergency 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 costs are still very important to 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 distinguish itself from other companies and gain a competitive advantage. In addition, investing in product development can help a startup emerge stronger from an economic downturn. By continuing to develop and improve its products, a startup can attract new customers and retain existing ones, enabling it to grow and be successful in the long run. This is no different from previous years; product development has always been a major expense for CEOs, regardless of the economic climate. – Chenyu Ren, Markai, Inc.
In difficult times you often see people cutting back on their marketing budgets. This is counterintuitive because it’s crucial for people to know that you’re still in business during tough times. It is essential that people understand that you are still here and 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 specifically for email marketing. – Dan Stevens, Protea Financial
7. Cyber Security
Cybersecurity is an important consideration for businesses of all sizes and 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 cyber-attacks and companies need to be prepared to protect their systems, data and customers against these threats. This may differ from previous years as the Covid-19 pandemic has brought additional cybersecurity challenges and risks, such as the increased use of remote working and the potential for new types of cyber-attacks 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 business. – Olufemi Shonubi, EduTech Global
8. Financial Planning
In economically difficult times it is even more important to invest in good financial planning. If you have a CFO, trust their advice to guide you through the years to come in a way that balances growth objectives with cash runway. If you don’t have a CFO, invest in a solid financial model for your business with built-in upside, down, and medium-case scenarios so you can adapt to whatever the future holds. – Andrew Powell, Learn to win
9. Losses and Late Payments
Indicators point to a global cost-of-living crisis, which means buyers need to cut back. While not a typical business expense you would budget for, losses and late payment of invoices are crucial to surviving in tough economic times. Losses occur when a company cannot generate enough revenue to cover costs. This can have various causes, such as the loss of customers due to competition from larger companies or economic recession. As expected, customer payments may be delayed. Budgeting for this in advance is a good way to protect the business as it weathers the storm. Both of these things are more common in tough economic times, so CEOs should take note, especially this year. – Tonya Bruce, Lead Beautiful, Inc.
10. Customer Retention
Every CEO should spend at least 13% of their budget on customer retention programs. With fears of a recession coming, more and more customers are cutting back on expenses and subscriptions that could impact the baseline of many companies if they happen en masse. For this reason, customer retention is different from previous years. To mitigate this problem, you can offer customer loyalty programs. Renew the subscription duration for the same price or offer additional discounts and package it as an offer to keep customers with you. Give your customers the option to suspend billing or their subscription for a limited time instead of canceling. Remember that customer retention costs are always lower compared to customer acquisition. – Brian David Crane, Spread great ideas