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18 HARTFORDBUSINESS.COM | APRIL 21, 2025 Sponsored Content www.chelseagroton.com Preparing Your Business for Resiliency By Rich Balestracci, SVP, Commercial Lending Department Manager at Chelsea Groton Bank or service is essential, as it helps you gauge how sensitive your business is to changes in price and quantity. Questions to consider would include, how would increasing pro- duction impact pricing for your product or service? Or conversely, how would a drop in demand for your product of service impact your pricing? Another key consideration should be understanding your operating leverage. Operating leverage is essentially the correlation between changes in revenue and the corresponding impact on net income with the impact being driven by the level of fixed and variable costs. Higher fixed costs result in pressure to achieve a higher break- even revenue, but greater profit margins after the break-even point. Lower fixed costs and higher variable costs result in more steady net income changes, reducing risks relat- ed to sudden revenue swings. Businesses should seek out operational efficiencies and find the optimal balance between fixed and I n today's unpredictable economic climate, it's more important than ever for business owners to be prepared for market uncertainty. Over the past five years, businesses have faced significant obstacles, including supply chain disrup- tions, economic uncertainty, digital transformation, increased cybersecurity threats, wage inflation, and talent acquisition and retention challenges. Busi- nesses have also had to navigate the complexities of work-from-home and return-to-office arrangements, the geopolitical climate, and artificial intelligence. To build resiliency, businesses should focus on three key areas: optimizing their balance sheet, evaluating their income statement, and managing risk. • To optimize your balance sheet, focus on working capital by reducing the cash con- version cycle in order to maintain adequate liquidity. This includes reviewing if you cur- rently have the appropriate levels of invento- ry, or if you could scale back so you can be more flexible about where money is allocated. Improving payment collection practices and negotiating more favorable terms with suppli- ers will also help reduce cash strain. Addition- ally, the business's overall capital structure should be reviewed and positioned to manage through supply chain issues, shifts in demand, or even to take advantage of potential new opportunities. Diversifying funding sources and managing debt effectively can provide a greater degree of flexibility to respond to changing business needs. Lastly, you want to ensure you are adequately protecting assets, including physical assets, staying mindful of fraud mitigation, and evaluating whether busi- ness interruption insurance or credit insurance can help protect yourself from external events. • On the income statement, focus on un- derstanding the factors that most impact revenues and expenses. Understanding the price elasticity of demand for your product variable costs to enhance profitability and provide opportunities to scale effectively. • Risk management is another critical area. Consider diversifying supply chains to re- duce dependency on any single source and exploring digital solutions to help streamline operations and improve efficiency. Addition- ally, businesses should consider the poten- tial impact of tariffs, the geopolitical climate, and the development of artificial intelligence on their operations. As cybersecurity threats continue to be on the rise, ensure there are security measures in place to protect sensitive data. For exam- ple, employees should be educated on how to spot counterfeit checks and instructed not to accept changes in wiring instructions over email. Instead, they should independently con- firm wiring instructions in person or by phone with a trusted and verified phone number. It's important for businesses to set up online and mobile banking alerts and push notifica- tions for high risk or high value transactions as an additional safety measure, and bank accounts should be monitored daily, so fraud can be identified quickly, providing business owners with the highest probability of recovery. Navigating market uncertainty requires a proac- tive and strategic approach. These considerations should always tie into a thoughtful business plan, that is revisited and updated as a working doc- ument. By focusing on optimizing your balance sheet, analyzing your income statement and cost structure, and managing risks effectively, busi- nesses can build resilience and adaptability. Interested in learning about Chelsea Groton and all the ways the Bank supports businesses? Visit www.chelseagroton.com. Member FDIC. Equal Housing Lender. NMLS Institution ID 402928.