Entrepreneurs may face various challenges in 2023. Some outside their industry and some intrinsic industries. As an entrepreneur with experiences from various industries, from business to manufacturing, I can already expect some of these challenges. Let’s take a look at them from the perspective of a Bangladeshi entrepreneur.
The biggest challenges, from the beginning of 2023 until the rest of the year, will be caused by external factors. These are not always under our control and sometimes there is no solution.
However, it is important to be aware of them in order to avoid the worst possible consequences, considering the real challenges will always be there. We will take a look at these factors as we consider what 2023 may bring us.
In December 2022, inflation approached 9 percent, and as the economy began to recover, high demand for products put undue pressure on prices. To make matters worse, energy costs had skyrocketed.
If we hold large amounts of cash, inflation is a particular concern. Money loses value because the money is only in the checking account. On the other hand, the goods and materials needed for production become more expensive.
To limit the negative effects of inflation, one can try to keep liquidity as low as possible. For example, we can now store food that we will need later. Or if you’re looking to invest in improving your business, now might be a better time than later. Therefore, cash can be invested elsewhere without losing its real value.
Other export-oriented industries, most of our domestic industries are highly dependent on imported raw materials. And because of foreign exchange reserves, many firms are unable to keep enough raw materials that their production will be hampered and they may be fired.
Gross foreign exchange balances with banks fell to $4.5 billion in October, down from $5.2 billion at the end of June this year, according to Bangladesh Bank data. But to maintain it, local industries will face problems in maintaining production and fixed costs that layoffs cannot be controlled.
There are also factors inherited from the industry. For example, a stable cash flow is essential for the survival of a company. And every industry is somehow related to another industry.
For example, the home appliance industry is related to the packaging industry. Therefore, even if the home appliance industry does well but the packaging industry does not, or vice versa, the supply chain or market will suffer.
Instead of earning a steady income, many entrepreneurs struggle to pay bills, pay workers, and rent. These problems are usually caused by late payments. In many cases, the customer wants to pay the invoice 30 days after receiving it, and in some cases 60 days after receiving the invoice.
To reduce this delay, he may bill every 15 days instead of every month. This is a breakdown of the waiting time from one payment to the next. Another option is to require a deposit at the start of the contract.
Financing is an issue that both new and established entrepreneurs face. If you are still in the early stages, you may be looking for an angel investor or seed capital. If you are a seasoned entrepreneur, you may need to cover overhead or supply costs on time.
If inflation continues to rise in 2023, financing will continue to become more expensive. If you’re going to use a line of credit, you can improve its utilization by running a more efficient cash flow, which should save you a lot on your interest payments.
In short, an entrepreneur’s performance in 2023 will only be outstanding if he can survive the year by maintaining cash flow, without layoffs and by properly managing funds.
In 2023, we should not look for high profit margins, but focus on maintaining the business. Being a successful entrepreneur is probably one of the hardest jobs one can have, but it’s also the most rewarding.
It’s not the money that gives the greatest satisfaction, but the satisfaction of overcoming new and constantly emerging obstacles in creative and hard-working ways. Therefore, new entrepreneurs should not lose hope in 2023.
The author is the Managing Director of Miyako Appliance Limited, Bangladesh and holds the first PhD in Business Administration from IBA, University of Dhaka. He is also Associate Professor of SBE, Autonomous University of Bangladesh.