Financial Tips

The Importance of Assessing Relationships Amid Times of Financial Uncertainty

In uncertain financial times, it becomes even more important for business owners to have strong relationships with their bank, CPA and financial advisor. But I also recommend assessing and cultivating other key relationships to help you weather the storm until market conditions improve.

Internal Business Relationships
Particularly during an economic downturn, success is all about understanding what drives your business. Looking back at the Great Recession, I believe the companies that best navigated it did a good job of recognizing and retaining the people who created value for them — rather than simply implementing widespread layoffs for immediate expense relief.

As a business owner, can you confidently determine the key members of your organization? How do you define them? The top salespeople might be an obvious answer, but sales numbers can be misleading without taking a close look at underlying metrics and margins. What steps have you taken to understand who really propels the company forward and makes a great impact on customers as well as other employees? Your business might have several division managers, but other people in those divisions could be the true difference-makers.

I wouldn’t tell anyone how to run their company, because I’m not in their shoes and each enterprise is different. But I will say that looking under the surface can be very insightful. If you haven’t yet gone through the process of evaluating your organization to determine who the key people really are, now would be a great time. And if you already have a good sense about it, maybe compile a list of those employees so you can reach out to them when you need help or advice. While it might feel like the stress and responsibility of success fall solely on the owner, it’s vital to have team members you can depend on.

Additionally, make sure to take care of those employees because they’ll ultimately sustain your company through uncertain times. To help nurture these relationships, it’s important to recognize consistent effort. In a challenging environment where victories may be smaller, celebrating success and providing meaningful recognition can matter even more. Strong leaders regularly acknowledge achievements across the entire organization in a variety of ways.

External Peer Relationships
Beyond company relationships, many of the most successful business owners I know have extensive networks outside the workplace. They may sit on nonprofit boards, participate in leadership organizations, regularly meet with other business owners or industry peers, or be active with their church or synagogue.

Have you explored local CEO groups? There are often many to choose from. You could even create your own roundtable in order to understand what’s happening across the landscape of various industries. That information could be vital when strategizing for your own enterprise.

A supportive and knowledgeable network can also help keep business owners from feeling isolated or overwhelmed. It’s useful to have peers available to share ideas with and gather feedback from. To remain successful, I recommend surrounding yourself with other successful people who can provide insight. It can be invaluable — especially during difficult times.

Financial Reporting Relationship
Although this isn’t a relationship as we normally define it, I also suggest reassessing your connection to financial reporting metrics. Many business owners traditionally focus on their income statement rather than balance sheet. But an income statement might not tell the full story because all of the money you’re making won’t necessarily land in your bank account, depending on how that money moves through the company.

Understanding the cash-conversion cycle of your business can help you navigate economic downturns. I liken it to that age-old saying about planning for a rainy day. The strength of a balance sheet is that it reveals how well you’ve planned and can manage through those cycles.

Which reports do you look at to ensure your business will succeed next month, and determine whether it was successful the previous month? If the balance sheet isn’t among them, maybe it should be. And if you’re uncertain about how to make sure you’re looking at the right reports, that’s another area where peer relationships can be invaluable. It all connects, and an informed approach to financial reporting could help you become a better decision-maker as an owner.

With widespread inflation, a difficult job market and increasing interest rates, today’s economy presents a lot of uncertainty. This makes relationships even more critical for business owners. In addition to what I’ve described above, it is vital to have a solid relationship with your lender. At Univest, we prioritize understanding your business so we can serve as a trusted partner and provide the best assistance possible aimed at stability and long-term success. To find the right team to support you through both encouraging and challenging times, contact me to have a conversation and see what’s possible.

Univest Bank and Trust Co. is Member FDIC, Equal Opportunity and SBA Preferred Lender.