While we can all agree that it’s important to have good jobs and opportunities at home, the reality is that we live and work in a globalized economy where a lot of the things we currently buy and sell are made overseas – typically in China.
With the U.S. ramping up a potential trade war with China, we’re now facing the prospect of tariffs on a large number of items – including tariffs that could make those things more expensive for you and your customers. It could also make things harder to get certain things if tariffs make those products uneconomical.
How do you, a small business owner, insulate your business from a trade war and tariffs?
The first step is to review your inventory and take a look at what items are currently made in China that could be subject to tariffs between 10% and 25% and possibly up to 40% in the near future. If your inventory is low and you’re confident that you can sell those items, it might be time to place an order before the price goes up.
Pay special attention to consumables and things like wires and connectors that you use every day and could increase your own installation costs. Increasing the cost of install could push the cost of work past the breaking point for some of your customers, so it might be good to stock up on those things as well.
Reach out to your reps and distributors, or manufacturers if you deal directly. Find out if they’re planning ahead for potential tariffs, what they’re expecting, and what the impact could be on your prices. There’s a good chance that some of the brands you carry might already be planning ahead for the trade war or are starting to source materials elsewhere.
Evaluate the potential impact on your customers. The last time the U.S. introduced tariffs on steel of 30% back in 2002 – slightly higher than the 25% proposed by the Trump government – over 200,000 people lost their jobs and the economy declined by over 5%. China’s counter-tariffs will apply to agriculture, aircraft, cars and machinery, and chemical products, which means that some of your local industries could be severely impacted, which means that some of your customers could have less to spend on their vehicles. If your level of exposure is high, it might be time to re-evaluate your marketing and product mix to better fit your local economy. The upside is that people tend to hold onto their cars longer in a downturn, and may be more likely to invest in their vehicles as a result. For example, if you offer services like protective film or ceramic coatings, emphasize to customers that an investment those products will add years to the life of their vehicles.
Start marketing. If you know the price of certain products is going up, let your customers know when and why – and give any customers sitting on the fence a reason to come in earlier than later.
Start building your war chest so you have some extra cash to cover rent and wages if things get slow, buying you time to come up with a plan to adjust your business model to whatever changes might take place.
There are some positives to consider as well. Amazon’s advantage will likely be reduced, for example, possibly giving you an opportunity to compete on both price and value. If the trade war is successful, it’s likely that your customers could have more disposable income in the future. And if a trade war is averted, it will likely be because of a new trade agreement that gives you more certainty going forward.
The wrong approach is to wait and see, or assume tariffs won’t affect you. A little knowledge know, and a plan of action, could make all the difference.
https://www.avidworx.com/wp-content/uploads/2018/04/97106538_s.jpg692692Andrew Mitchell/wp-content/uploads/2018/01/AWX-Logo-Long.pngAndrew Mitchell2018-04-06 11:03:062018-04-06 11:03:06Friday COACHWORX Business Tip: Prepping for the trade war