I spoke with several experts in the financial industry for their takes on how Brexit has and could affect small businesses. Here’s what small-business owners I interviewed said you should think about as you prepare for the rest of the Brexit fallout.
Change in International Business
There are likely to be changes for those companies that do business internationally, but not immediately, notes Rick Rivera, a partner of Safeguard Investment Advisory Group, which specializes in retirement planning.
“Small businesses dealing internationally must keep in mind that these changes may take up to two years to go into effect,” says Rivera. “The only immediate potential effect would be exchange rate concerns, but that is nothing new. This means there is no need to panic or overreact. There is nothing that is going to happen overnight that small-business owners won’t have time to react to if the need should arise.”
The biggest concern regarding Brexit will be that the U.K. would not be able to duplicate the types of trade deals it currently possesses with third parties, adds Willie Schuette of The JL Smith Group. “Small retailing businesses will now have to have separate European distribution; meaning lower margins and higher shipping costs. And new rules, agreements and laws will have to be rewritten and contractual agreements will be impacted.”
Long-Term Uncertainty
The Brexit vote created a situation that very few businesses had prepared for, believes Jeff Stibel, vice chairman of Dun & Bradstreet, which is offering complimentary access to business credit reports until the end of July. “Savvy small-business owners are waiting to see what this vote actually means versus reacting quickly, which leaves many small businesses exposed to long-term uncertainty,” says Stibel. “Businesses are good at operating in good times and typically have a plan for the tough times, but they are uniformly bad at operating in times of uncertainty. For this reason, many small businesses may be feeling vulnerable at this time.”
Long-term uncertainty regarding the effects of the Brexit vote does seem to be in the cards, agrees retirement income planning specialist Alexander Joyce, president of ReJoyce Financial.
“Being in the financial services industry and providing retirement planning solutions, we get a direct market indicator as to the sentiment regarding Brexit that plays a role in market fluctuation and volatility,” says Joyce. “The baby-boomer generation doesn’t like change, especially if it is sudden, directly impactful and out of their control. Brexit changed our long-term planning objective for some of our clients, as well as caused immediate change and/or modification in the short term. Our goal for each client is successful retirement planning, but so far in 2016 that goal is becoming harder to manage. Interest rates, as we know, are nearly negative. Brexit will significantly impact an already weak US economic growth.”
Potential Economic Disruption
Certain parts of Europe and Asia are seeing zero and negative interest rates, notes PBS TV financial show host Joshua Mellberg, founder and CEO of J.D. Mellberg Financial. “The United States is seeing more and more money coming over from Europe, because the risk is so high there and the interest rates so low. For our business, it actually helps us, because we focus on protecting people’s money, but if we continue to see bigger ripple effects here in the U.S. leading closer to zero to negative interest rates, that will hurt us. If you look at the UK, you’ll also see tremendous inflation that could potentially hit here, as well.”
Brexit could also significantly affect your acquisition costs, believes Joyce. “Wise small-business owners make everyday operations decisions not based off of assumptions or a conservative approach from questionable knowing, but by knowing the actual numbers,” he says. “For many small businesses the cost per acquisition has gone up or will go up. If your business is already struggling, this could be highly detrimental.”
What to Keep in Mind Regarding Brexit and Your Business
Don’t panic. “So far Brexit has been a non-event for the small business owner,” says Chuck Price, radio show host, author and president of Price Financial Group Wealth Management.
“Be careful not to overreact,” agrees Joseph Mallen, chief investment officer for Sawtooth Solutions, a technology-focused company that concentrates on wealth-management platforms. “There may be some benefits in the area of potential trade agreements,” he says. “I think the UK leaving the EU, especially from the U.S. standpoint, is going to allow the U.S. and the UK to negotiate their own free-trade agreement. That could actually be a benefit to U.S. companies in the long run.”
Build up cash reserves. Having sufficient cash capital as a small-business owner can be helpful. “When events like Brexit happen, the market will react,” says Joyce. “Depending on your profession, this could affect your marketing, bottom line and ultimately your operations.”
Avoid being blindsided. “Look at who your clients are, who your vendors are and how they all might be affected,” says Mellberg. “Determine if you will experience any ripple effects. It could be three to six months out, but don’t be blindsided.”
Always focus on customer service. “When a business has a loyal following, it can weather most storms,” says Rivera. “Always concentrate on what makes your business unique and what keeps customers coming back. If you’re doing all of the right things, chances are Brexit won’t affect your business.”
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The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
