Business Tips brings you the monthly review of the market, economy and business
Sometimes I need to get a better picture of the market and our economy, so I take a step back. It helps me to make better business decisions. Focusing on key factors illuminate the important details, like a night lamp on a desk. Look at what’s important and the rest fades into darkness. We are often lead by the headlines and news, dissolving the facts into the abyss of information and events.
There are a few key things that are happening right now that business owners can use to their advantage. After all business isn’t just a service or product. It’s a play that you have to make on occasions to steer towards success. Being informed can help you to make market-leading decisions for you and your business. Welcome to the first monthly newsletter of Business Tips.
A new economic landscape
Looking at the advanced level three regulations, there are good signs of economic recovery. The health and safety requirements are strict and this will entail business owners to budget for sanitizer and dispensers etc, if they want to continue trading. Through the uncertainty we look for reassurance and there are a few key points to consider as we enter this relatively new era…
South Africa tracks reasonably close to the United States economy so I took a look at the business funding statistics for a first indicator on a pulse. The approval rates are up from 8.9% in April to 11.5% in May. The US has been easing its economy out of strict lock down policies allowing more businesses to reopen. In SA we have also seen relaxed lock down regulations allowing for hair and beauty salons, casinos and restaurants to reopen. This ties in well with the confirmation from lenders that it’s back to business, so an increase in approval rates is likely for SA.
Discount down the chain
Oil infamously made the headlines recently, with it’s price falling below zero during the market crash. With so many economies in lock down, the demand for oil simply vanished. Only essential services were allowed to operate and subsequently the oil plants ran out of storage space. Oil rigs can’t be shut down because once the pumps lose pressure, it’s over. With no one using oil, this is why the prices got so cheap and even dipped below the zero line. A first in history.
The current market price for sweet crude oil is $39.25 a barrel – still well below the pre-covid price of $60 a barrel. This means that with cheaper fuel prices and retailers/suppliers eager to get business back to normal levels, many a good deal will be on offer! The timing is perfect to book out and settle payments for future invoices now. As things return back to normal, there could be every excuse to bump up the prices so you need to be prepared. Cheaper fuel prices can earn everyone discount down the chain, so we “buy the dips”.
The bigger picture
Businesses, employees and customers are all affected. No matter how well a business is set up, there are likely to be components that will not be within your control. Some businesses rely on the service of another business or stock from a supplier to operate (sometimes both). With things being out of your control it’s best to look closer to home and keep the employees happy and financially well as part of your survival strategy.
Working closely with business owners highlighted the importance of the financial wellness of staff. In most cases employees that were financially stressed performed worse at their job than others that were better off financially. With many individuals taking home paycheck cuts, personal loans for employees have also seen an increase as employees seek to equalize their cash flow. Lenders are currently only approving individuals that are employed by an essential service for the time being.
The motoring industry
According to IOL car sales will only start bouncing back by October at the earliest. This means that dealerships will be offering deals that may never be repeated. After a sales drop of nearly 99% buyers are almost guaranteed to have a lot of bargaining power during price negotiations. While we assist with vehicle finance, we are eager to see the increase in demand tick higher as we move through July. We will be introducing asset finance in the near future so watch this space!
The current economic landscape is unknown and full of uncertainty. Armed with enough information you can make decisions that can make the difference between sink or swim. We are forced to work in unity as the business-employee-customer triangle keeps us dependent on one another for support. One thing is certain – when we look back at this period at some point in the future we will be glad we didn’t give up.