Just like in the closing minutes of a tied Super Bowl, crunch time is when every move your company makes is critical for its success. For many companies, crunch time is their busy season—whether it’s the summer for a seasonal operator or the year-end holidays for a retailer. These critical business periods present the opportunity to make up for losses from earlier in the year or, in some cases, even generate a large portion of their annual revenue.
The past few years have been challenging with Covid-related shutdowns and restrictions impacting supply chains and customer shopping habits, and now inflation is rearing its ugly head, with numerous financial implications. So, what is a company to do?
To set your company and team up for success during your busy season, focus on these four key areas:
• Supply chain and raw materials.
• Pricing and margins.
• Logistics and transportation.
• Transparency and communication.
Your supply chain, the vendors and access to the raw materials to make your goods will make or break your busiest time of year. Losing a customer because you cannot fulfill their order will cost your business more than the added expense of supply chain redundancy. Two years of Covid have introduced levels of supply chain insecurity that really have not existed before; your vendor in China may not be operating, or your vendor in Texas sits idle waiting for parts.
There may not be much you can do. Your partners are dealing with the same issues you are. However, have you looked at multiple sourcing and appropriate alternative suppliers? Have you reviewed your contracts to know each party’s obligations when there are issues? If nothing else, knowing the issues and any potential threat to your supply of products will make pricing and communication decisions easier.
My attitude toward pricing is counterintuitive. Protect your margins. Your business will not survive if you are not managing prices properly. Add surcharges where necessary—fuel, coordination, gas, etc. Pass along any increased raw material costs. Employee costs are a bit tougher to pass along, but basically, price your goods to maintain your margins.
In the end, I believe you are better off losing a customer because they thought your price was too high than taking an order at a lower price and then failing to deliver on the customer’s order. The loss of goodwill with the customer whom you failed will cost you the customer’s future business. A customer who leaves due to price will return when they find that other firms cannot deliver as you can. If your product is what they want, whether it be for product quality or service, they will eventually come back. You risk more by not delivering than by charging too much.
If you have made the product and sold the product, you still need to ensure you can deliver the product to your customers. Logistics companies are experiencing severe constraints from shipping container space to a lack of truck drivers and pilots, to short-staffed warehouses. Given that customers are time-sensitive, you need to make sure the product arrives on the shelves when they need it. Here again, planning and awareness are key to ensuring that your product has the logistics support needed to get to customers. What are the alternatives? Does it make sense to bolster your in-house delivery? Have you factored increased costs into your pricing?
Through all these challenges, be as transparent as you can be. There is no need to obfuscate or hide. Everyone in business knows things are more expensive and are dealing with similar supply and planning issues. Be honest and upfront about any price increase, including surcharges, delivery or transportation charges. Because most businesses are in the same boat, most will understand. Even if they must make a hard decision to say no to your product, they will appreciate your candor. You may lose the sale, but you’ll keep a customer. Nothing will hurt your business more than lying or hiding charges from your customers.
Your busy season is crunch time every year. This year brings its own unique set of challenges, some (like price inflation) we have not seen in the business cycle in a while, so get prepared and be ready to make it the best period of the year—even in the face of strong headwinds.
This article was first published on Forbes Finance Council.
