Your Business & the Fiscal Cliff

Politicians in Washington are trying to avoid driving off the fiscal cliff in a desperate attempt to avert economic disaster. The fiscal cliff is a political compromise resulting from last year’s debt ceiling negotiation. Without a solution in the coming days, the fiscal cliff will cause automatic federal spending cuts and taxes on January 1 totaling in excess of $500 billion. Due to this uncertainty, business owners can be sure of very little in the coming year.

Here are a few facts business owners can rely upon in 2013:

Regardless of what new compromise politicians may reach, problems, fears and pressures felt by most business owners will not be allayed.

1.)     The economy will be stagnant at best.  Stagnation may be an optimistic economic forecast. In the book, Aftershock[1], the authors, well-known and respected economists, warn of economic danger emanating from the inevitable collapse of the U.S. dollar and the increased velocity of escalating national debt. These events, coupled with the fall of the housing and credit markets, spell even tougher times in 2013 and beyond.

2.)     Continued regulation will stifle attempts to make America more energy-efficient increasing dependence on foreign oil causing upward pressure on transportation costs.

3.)     Your taxes will go up which will maintain pressure to keep costs low, including and especially, inventory levels and headcount. A new Gallup poll reveals that small business owners expect to add fewer jobs in 2013, the fewest new job growth since late 2008. Patricia Soldano, western region chair for GenSpring Family Offices, says the tax unpredictability and lack of uncertainty is crippling to small business owners and large corporations alike. “There is no way to plan,” she says. “It’s a huge issue for families and businesses.”[2] Small business owners (e.g. S-Corps, LLC’s) pay their business taxes via their personal tax returns subjecting them to the newly proposed, higher tax brackets.

Here are actions your business should consider in 2013:

Insulate from the coming inflationary storm

The cost of everything is forecast to rise next year, most notably fuel. This will affect transportation costs, raw material costs, and consumer goods. If you are buying anything in volume, it may be wise to consider locking down prices now for 2013. If possible, insulate your business with multiple layers in each category to guard against the potential for supplier bankruptcy and issues emanating from rising demand and limited supply.

Get creative with inventory

Why carry more inventory than you need? Consider drop-shipping more from the point of manufacture directly to the customer. Your computer systems can be altered so that the customer has no idea you aren’t shipping from your own distribution center. Amazon has this tactic mastered. So can you!

Make your money with other people’s assets

Do you really need a distribution facility? More and more, companies are outsourcing complete distribution center operations. They no longer see a need to own or lease one or more facilities around the country or the world. No operating costs, no human capital, no software investment. Turn that fixed cost albatross on your P&L to a nimble, variable cost model offering a strategic advantage. Hickory Farms has recently done just that! This move proved especially helpful for a seasonal company that sees most of its business occur in a compressed portion of the year.

Watching the politicians in Washington drive over the fiscal cliff is a scary proposition. You don’t need to let the resultant uncertainty tie your hands in the coming year.

Samuel R. Polakoff is president of TBB Supply Chain Guardian. TBB is a 66 year old lead logistics provider specializing in small, medium and early stage companies. TBB manages supply chain functions for companies around the world. Sam’s industry insights have appeared in the following publications: The Journal of Commerce, Traffic World, Inbound Logistics, The Baltimore Business Journal, The Baltimore Sun, The York Daily Record and The Central PA Business Journal amongst others. Sam currently authors The Supply Chain Guardian Blog.  To learn more about creatively profiting in 2013, contact the author at srpolakoff@tbbgl.com.

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