The economic crisis is worsening and how business consulting can help

The article was written in collaboration with Levy Yotzim

Among other things from the interest rate that has increased over the course of two years and the rising inflation. Today, with the war whose end is still in sight, in a state of great uncertainty, the economic crisis is getting worse. In the following lines, we will provide a number of recommendations for dealing with the situation and we will see how a business consultant can assist in the success of the crisis in the best and most professional way.

A few words about the economic crisis in the Israeli economy

The Israeli economy is still carrying on its back the effects of the years since 2020, i.e. the consequences of the Corona crisis, together with the increase in energy prices due to the war in Ukraine, an increase in shipping prices, etc. As in international markets, the Israeli economy also experienced a significant increase in the consumer price index, i.e. inflation. However, while there has been some recovery in other markets, the political situation of 2023 has left Israel behind. Only today we are witnessing the beginning (hopefully the continuation) of the interest rate reduction in the economy.

Due to the increase in prices, and against it the increase in interest rates, many businesses feel the sword at their throats: customers have become more frugal and with their hand on their wallets, loan repayments at variable interest rates have become higher, sales and profits have decreased, and the flow situation accordingly. If that's not enough, in recent months Israel has been in a war that has led to a further slowdown in the economy, led to many workers being forced out of work, and harm to a wide range of industries. All these and more will create the economic crisis that affects almost every business in Israel. Manot must overcome this special situation On the best side, it is very important to contact a skilled business consultant.

In a period of uncertainty – get professional assistance
Many business owners in Israel routinely conduct themselves in a semi-professional and semi-orderly manner, at best. However, what worked for the business in the days when the situation in the economy was relatively reasonable, can no longer be successful in a time of crisis. One must learn how to conduct himself in a responsible, orderly and correct manner, with a thorough understanding of the real situation in the business, the existing risks, the assets and opportunities, the possibilities for efficiency, and more. For this, the business owner should receive assistance from a professional who knows well what he is doing. That is, to turn to a business consultant with a comprehensive economic education, who knows very well what is happening in the economy, what is happening in the particular industry and field of activity, and with it effective tools. The first tool is organizing.

In a time of uncertainty and crisis – to work in an orderly manner
Naturally, the crisis affecting the economy affects every business in a different way. There are a few businesses that did not feel the crisis firsthand and even managed to increase sales and profits, and in contrast there are those that experience shuffling, decline and even a real crisis that threatens their continued existence. Therefore, the work performed by a business consultant with each business owner will be different in content, but not in essence. In terms of substance, the first thing to do is order. Indeed, in a period of crisis for businesses from many sectors, what needs to be done is first of all to build an orderly and solid infrastructure to continue.

First and foremost, a business consultant helps the business owner understand what the financial situation really is. Among other things, it is necessary to understand what the expenses are in the various areas, what is the exact level of profitability, how much is really brought in and how sales have decreased or perhaps increased, what are the repayments on loans and what are the terms, what is the cash flow situation, etc.

Naturally, lately the expenses of most businesses have increased (unless they have reduced activity) due to the increase in raw materials, the increase in energy expenses for operating machinery and equipment, the increase in loan repayments, the increase in rental prices, and the like. Therefore, an in-depth and accurate examination of the true state of expenses of the business must be carried out, which does not correspond to estimates based on the situation before the current crisis. The accountant's reports also do not provide a complete answer for this purpose, because they photograph a situation from several months ago, and it is certainly possible that now there is already a decrease in sales and an increase in production and operating expenses, what's more, the loan repayments do not appear in the profit and loss statement.

An accurate picture of everything that happens in the business
If so, the first thing a business consultant will do is give the business owner a reliable and accurate financial picture. Together with her, the business owner will receive recommendations concerning the various fields. For example, streamlining expenses through closing and recycling loans, changes in pricing, changes in agreements with suppliers, switching to outsourcing in some areas, and the like.

Also, a business consultant will perform an in-depth review of everything that is done in the business, and will emphasize both strengths and weaknesses. For example, does the business use its advertising budget wisely and effectively? Competitors, etc. And again, in each area, recommendations and insights for improvement will be given, which will also later be included in the business plan.

Beyond that, a business consultant accompanying the business owner during this period of crisis will place emphasis on providing managerial and financial tools that will allow them to move forward in a professional, correct and responsible manner. For example, a business consultant will teach the business owner exactly how to build a cash flow statement, and how to ensure that it is filled in regularly and continuously. Also, a business consultant will help the business owner build effective management tools, whether in the context of self-management, employee management, delegation of authority, providing incentives, assertiveness, self-marketing ability, etc., all of this according to the need in view of the qualities that will advance the business and stabilize it.

A business plan during a crisis – a must!
Yaron Levy, the owner of " Levi Consultants " says that a business plan is always mandatory, and even more so during the economic crisis. The business plan will provide a clear forecast of expenses and income every month for the next one or two years. In fact, the business plan is based on a business consultant's in-depth knowledge of the business, on identifying the weak and strong points, on the problems discovered, on the forecasts, on the insights and recommendations. All these and more are merged into the business plan in the form of realistic and applicable solutions, according to which the business will be conducted in the near future.

It must be emphasized that especially during the economic crisis, a realistic and even a little pessimistic business plan must be built. We must take "safety margins" so that in the worst case the predictions will come true and the business owner will be prepared and ready for it, and in the best case we will win the assessment. However, it is important to emphasize that the goal of the business plan, and of business consulting in general, is to increase profitability and even turnover. Although, during the period of crisis and uncertainty in the economy, the aspiration is first of all to stabilize and build a solid infrastructure, but we are always looking for the possibilities to increase the profit, which is the bread and butter of any business that has a life.

The steps that the business plan will bring vary, of course, from business to business, depending on its situation, its field of activity, its goals, etc. However, in any business and in any situation, the plan is a must, because it enables orderly conduct at all levels – financial, marketing, management and so on. With its help, the business owner knows exactly where he stands today, where he wants to go, how he is going to reach his destination, what are the obstacles he faces and what he must do to deal with them.

The plan can be thought of as a compass that allows the ship to continue moving in the right direction, even if the sea is currently rough and the waves are high.

The article was written in collaboration with Levy Yotzim