With so many changes happening on the economic front, it’s only natural to ask, what’s next? While you have no control over tariffs, global instability, and how customers spend their money, you can prepare your company for a worst-case scenario. Owning an independent business is a high-stakes game that requires many players to participate and achieve specific goals. Rarely will everything go according to plan. Before outside factors derail your plans, be prepared. Pivoting to a “what if” scenario can prevent an operation from entering full-blown crisis mode. This strategy can be a practical solution for owners who prefer to wait and see rather than act quickly. Think of it as fire-drill practice for an event you hope will never happen, but could.

The Changing Reality of Tariffs
Last year, President Trump imposed tariffs ranging from 10 percent to 50 percent on products imported from dozens of countries. The Supreme Court has now ruled that the Economic Powers Act cannot be used to tax imports. Subsequently, the United States Court of International Trade ruled in favor of a business owner who filed a lawsuit to have the import taxes he paid refunded. Based on the court’s decision, the U.S. Customs and Border Protection must begin issuing refunds to businesses that paid import taxes. However, President Trump is seeking other options to reinstate 15% tariffs under Section 22 of the Trade Act of 1974.

Ultimately, for store owners, it comes down to the cost of goods and pricing products appropriately to adjust for tariffs. Most big-box retailers have already raised prices to offset the first round of tariffs. It is unlikely there will be a price rollback at this point. Independent retailers should review their current product assortment to prioritize high-margin and high-growth products that can be sourced domestically. Other low-margin imported products can be phased out gradually. Ask yourself if a 15 percent tariff is added to the wholesale price, will customers still buy the product? Now is the time to consider options to minimize the impact of a new wave of tariffs.

• Keep a close watch on margins and vendor prices weekly to ensure you are charging enough to cover your costs and avoid losing money.
• Consider stocking brands from secondary markets that are “tariff-free” since the landed cost may be lower than similar products you currently sell.
• Promote “maintenance and repair” since consumers are cautious about spending. They are more likely to fix what they have rather than buy something new.

Monitor Your Cash Flow

Financial planners advise clients to save 6 to 12 months of living expenses for unexpected life events. Similarly, businesses should build a cash reserve to cover operating expenses for 6-12 months during economic downturns. Start monitoring your daily cash flow to speed up invoice payments and expedite accounts receivable. Another way to free up cash is to use the “just-in-time” inventory management method.

• Partner with suppliers to extend your credit terms and increase your cash flow.
• Secure lines of credit now, rather than later. Refinance high-interest loans.
• Postpone capital expenditures and resume them when funding is more favorable.

It’s crucial to assess whether your business will have difficulty acquiring capital in the event of a downturn. It’s best to have preliminary conversations with your banking partners to clarify the requirements for obtaining funds.

Additionally, businesses that generate a significant share of their revenue from large contractors or government contracts should diversify to reduce the financial impact if the relationship changes in the future. Creating multiple revenue streams can lead to non-traditional partnerships that can attract a wider audience.

Be Transparent with Customers
Shoppers are accustomed to rising prices, as they experience sticker shock daily. If the cost of certain products noticeably increases, post a short sign to explain why. This best practice is commonly used in grocery stores to ensure customers are not caught off guard.

Take a Holistic Approach
Evaluate each segment of your business to find opportunities to eliminate waste and redundancies before it hits a rough patch. Create an action plan for what to do if business declines by 10–15%. What can you do now to prepare? The reality is that tariffs, international conflicts, and rising oil prices directly impact the cost of doing business. The best thing companies can do is prepare for the unexpected.