Entrepreneurs may face a variety of challenges in 2023; some outside their industry and some intrinsic. As an entrepreneur with experiences in various industries, from trading to manufacturing, I can expect some of these challenges ahead of time. Let’s look at them from the perspective of a Bangladeshi entrepreneur.
The biggest challenges, from the beginning of 2023 to the rest of the year, will come from external factors. These are not always within our control and sometimes there is no solution.
However, it is important to be aware of this in order to avoid the worst possible consequences, bearing in mind that real challenges will always be there. We will examine these factors in light of what 2023 may bring us.
In December 2022, inflation was approaching 9% and, as the economy began to recover, strong demand for products was putting undue pressure on prices. To make matters worse, energy costs were skyrocketing.
Inflation is of particular concern if we hold large amounts of cash. The value of money is lost 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 stock up on food that we will need later. Or, if you’re looking to invest in improving your business, now may be a better time than later. Thus, the unused money can be invested elsewhere without losing its real value.
Apart from the export-oriented industry, most of our local industries are highly dependent on imported raw materials. And due to foreign exchange reserves, many companies are unable to keep enough raw materials for which production will be hampered, and layoffs may occur.
The gross foreign exchange balance with banks fell to $4.5 billion in October from $5.2 billion at the end of June this year, according to Bangladesh Bank data. But to maintain this, local industries will face problems maintaining production and fixed costs for which layoffs cannot be controlled.
There are also some factors that are inherited by the industry. For example, a stable cash flow is essential to the survival of a business. And every industry is somehow related to another industry.
For example, the appliance industry is linked to the packaging industry. So even if the appliance industry is doing well but the packaging industry is not or vice versa, the supply chain or the market will be hampered.
Many entrepreneurs struggle to pay bills, worker wages, and rent instead of earning a stable income. These problems are usually due to late payments. In many cases, the customer wants to pay 30 days after receipt of the invoice, and in some cases, 60 days after receipt of the invoice.
To mitigate this delay, it may be required to invoice every 15 days instead of every month. This is a breakdown of the wait time from payment to payment. Another option is to require a deposit at the start of the contract.
Funding is an issue that both new and established entrepreneurs face. If you’re still in the early stages, you may be looking for an angel investor or seed funding. If you are an established contractor, you may need to cover additional expenses or on-time procurement costs.
If inflation continues to rise in 2023, financing will continue to become more expensive. If you’re considering using a line of credit, you can improve its utilization by implementing a more efficient cash flow, which should save you a lot on interest payments.
In summary, an entrepreneur’s performance in 2023 will only be marvelous if he can survive the whole year by maintaining cash flow, without layoffs and with good fund management.
In 2023, we should not seek a high profit margin, but focus on maintaining business. Being a successful entrepreneur is perhaps one of the most difficult careers one can have, but it is also the most satisfying career.
It is not the money that is the most rewarding, but it is the satisfaction of overcoming new and constantly emerging obstacles in creative and industrious ways. Thus, new entrepreneurs should not lose hope in 2023.
Sketch: TBS
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Sketch: TBS
The author is the Managing Director of Miyako Appliance Limited, Bangladesh and the first Doctor of Business Administration from IBA, University of Dhaka. He is also an Adjunct Associate Professor of SBE, Independent University Bangladesh.