I’ve recently been talking a lot with our peer groups about the changing economy. Unfortunately, the hopes of a soft landing for the economy are diminishing. I think we’ve reached the point where we all need to think about what rising interest rates and a looming recession mean to you and your customers.
We don’t know what’s going to happen. But let’s assume that there will be an economic downturn. If that becomes the case, what potential risks will arise? How much risk do you have in your customer base? Are there decisions you would make or priorities that you would change if you knew the downturn was coming?
For example, you may need to change the questions you ask customers to assess risk, create a risk analysis sheet with all your customers on it to evaluate your risk correctly, keep more cash on hand, or draw down on your line. If you don’t have a line of credit, you may want to get one. Also, you need to monitor changes in your prices, tools, labor, and overhead.
What impact is inflation having on your margins and your seat cost? I think you need to start monitoring this almost monthly. Remember, a $3 change in seat cost requires a $10 increase in price to maintain 70 percent gross margin. You need more command over your customer base and cost drivers.
Additionally, stay up to date with economic indicators. For example, I spend 10 to 30 minutes a day reading the Wall Street Journal. I also listen to a few financial podcasts each week. It would be best if you did the same.
The bottom line is that you need to be up on the wheel more than usual in the MSP race.