New year sprinkled with past years’ economics

Prices are up, yet growth is projected to slow. In the 1970s, shocks in higher oil prices created high inflation, which combined with commodity price shocks, and high unemployment led to “stagflation.” Many predict that now. After a pandemic that resulted in the government infusing cash to prevent a collapse, combined with shortages of labor and supplies, it’s no wonder inflation accelerated and now we are retrenching.

As I shop, I can feel it. Income isn’t matching higher prices. Businesses experience shortages of employees, high cost of goods, and try competing with national players that squeeze small business. It’s a time of frustration, and potentially failures. Despite the dire news, there are positive factors that prevail: resilience, preparedness and creativity.

Which businesses thrive? Where are you now, and in the future? What’s possible, and not? During the pandemic, companies didn’t survive because they were not resilient, prepared or creative. My bank’s proud of helping businesses through the PPP program.  Many are around today due to that lifeline.

Survivors practice the following: If you’ve never written a thought-out business-survival plan, you will eventually fail. A well prepared plan that includes resources, options and targets to operate in any environment. You have a business to run; who has time to plan? Would you fly with a pilot who doesn’t have a flight plan? If you don’t have a plan, and measure your progress, are you flying blind?

Have you considered your cost of capital? It’s a measure of capitalization, and whether you have resiliency. The mix of equity, the expensive form of capital, to your debt will inform you in making decisions about resiliency. Too much equity and your return is low, too much debt, and you won’t survive hits. The mix is the key.

Liquidity is the measure of cash beyond daily needs. It’s the “rainy day” fund. It takes great discipline to maintain. Cash is king. The ability to generate it, and keep it, is what companies strive for. “Save for a rainy day,” or talk to your banker about providing liquidity.

Establish a relationship with a banker before you need cash. Provide insightful knowledge of your business, and pay frequent visits. A banker on your side can be a great resource. Cultivate a relationship today.

The line between costs to maintain operations and service, and those considered superfluous, are key to profits. When did you last review contracts, vendors, etc.?  When did you last review margins? Are there areas for improvement and cost reduction? Is there room for price increases? It’s more efficient to generate profits through price increases, than just generating more sales. Your accountant can analyze your cost structure.

My grandfather said, “It’s not how much money you make, it’s how much money you keep.”

Have you reviewed your risks? Are assets protected? If you become incapacitated or die, would your business survive? Can you survive a lawsuit? Is your insurance up to date? It only takes an accident, misunderstanding or lawsuit to destroy you. An attorney and insurance agent will review everything and put in place safeguards.

I’m surprised at how many believe their idea, product or service, are what makes them successful. Great ideas and products can generate sales. But it’s people who are key to success. Talent is scarce. If you’re not attuned to your employees’ needs, you will lose your best. Turnover is expensive and disruptive. Treat your employees as a valuable asset.

There’s opportunity for success, even now. Take time to plan. Don’t wait. I wish you a Prosperous New Year.

Steve Apodaca recently returned to Las Cruces as market president for Century Bank. He will be based at their offices at 151 N. Roadrunner Pkwy.