Whether you’re a consumer or a business owner (or both), rising inflation and the cost of living is taking its toll. Business owners are battling to deal with supply cost increases and increasing wages against the backdrop of a looming recession.

For business owners, it’s important to slow down and recalibrate, says Daniel Moritz, co-founder and CFO of alternative lender Merchant Capital.

“It is not clear if we are facing a recession yet, but it's important to consider that there may be one coming. Recalibrating and strengthening your position, as a business owner and a consumer, in the meantime will go a long way,” said Moritz.

Reduce unnecessary expenses

Look at your company spend, and think carefully about what you actually need and what can be cut. Can you reduce your operations, subscriptions, utilities, or marketing spend? Review your current suppliers and find new deals or renegotiate your terms with your current suppliers.

Find new ways of rewarding your people

In tough economic times, you can’t always afford to give raises. So how do you retain your talent and ensure your staff still feel valued? Look at alternatives like more paid time off, opportunities to work from home, flexible work schedules, health and retirement benefits, profit-share, staff discounts and growth opportunities, says Moritz.

Get creative about driving sales

If sales have hit a downturn, consider creative ways to get back in the game. “There are lots of options. Rethink your marketing plan. Create promotions and discounts. Tweak pricing. Launch new products or services, or repackage old ones. Upsell to existing customers. Just do something different,” says Moritz.

Analyse your business

You can’t rethink something you don’t understand. Take a long, hard look at your business to understand where you are, pinpoint any bad practices and come up with clever ways to sort them out. “Ask yourself questions like: what manual tasks can be automated? What is my marketing ROI? What expenses can be cut? Is my customer satisfied with my product or service? How can I improve my offering?” says Moritz.

For consumers, the best way to navigate the storm is by getting back to basics.

Manage your debt

As a business, any alternative lending advances have a fixed cost and are not exposed to interest rate hikes. But as a consumer, it’s important to pay off as much debt as possible, because as interest rates rise, so do your repayments. If you do have to take on debt, make sure you know what you need the money for, and what is financially sustainable.

Shop around for better rates

Don’t accept the first loan or finance offer that comes your way. Banks are in competition with each other for your business, and so it's well worth holding out for the right deal.

Carefully track your spending

“While budgeting can often feel emotionally constraining, it can also be very empowering. It enables you to cut expenses and increase savings. When you don’t monitor your cash flow, you can’t make contingency plans for unknown expenses. A common approach is to save what is left after spending. A far better approach is to spend after saving,” says Moritz.

Negotiate insurance premiums

Negotiating your insurance premiums can create big savings. Remember that if you haven’t claimed from your insurer in the past year, you’re in a position to limit your next premium increase. Also, if you have a lot of assets covered by one insurer (car, household contents, and medical) then you are in a stronger position to negotiate a better rate.

Find ways to save and earn more

While it is essential to have savings, it’s worth putting that cash into short and long-term investment instruments. This puts idle cash to work and stands to make you some extra money. “Try not to promote one type of savings over another, but rather think how to build a passive income from existing funds. Are you able to generate a second income from financial markets?” says Moritz.

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About Merchant Capital

Merchant Capital is an alternative lender which provides tailor-made working capital solutions to retail, wholesale, manufacturing, and services-based businesses. Founded by lifelong entrepreneurs to overcome the barriers that small businesses face in raising capital, it sets itself apart in the market through a deep understanding of the challenges facing entrepreneurs, and an obsession with building lasting relationships that provide value to all parties. Since 2012, it has provided working capital to the value of more than R4 billion to over 20,000 SMEs using a “repay as you trade” payment model based on a percentage of sales. Powered by innovative technology, the model is customisable to SMEs, professionals and corporate clients across various business sectors and markets.