Entrepreneurs may face a variety of challenges in 2023; some outside their industry and some intrinsic ones. As an entrepreneur with experiences from various industries, from trading to manufacturing, I can expect some of these challenges beforehand. Let us have a look at them from a Bangladeshi entrepreneur’s perspective.
The biggest challenges, from the beginning of 2023 through the rest of the year, will come from external factors. These are not always under our control and sometimes there is no solution.
However, it is important to be aware of them so we can avoid the worst possible consequences, keeping in mind real challenges are always going to be there. We will take a look at these factors in light of what 2023 might bring for us.
In December 2022, inflation neared 9%, and as the economy began to recover, high demand for products put undue pressure on prices. To make matters worse, energy costs were skyrocketing.
Inflation is a particular concern if we hold large amounts of cash. The value of the money is lost because the money is only in the checking account. On the other hand, the goods and materials required for production become more expensive.
To limit the negative effects of inflation, we 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 are looking to invest in improving your business, now might be a better time than later. So, the idle cash can be invested in other places without losing its real value.
Other the export-oriented industry, most of our local industries are highly dependent on imported raw materials. And due to foreign currency reserves, many firms are not able to maintain enough raw materials for which the production will be hampered, and layoffs may happen.
The gross foreign currency balance 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 that, local industries will face issues in 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 for a company to survive. And each industry is somehow linked with some other industry.
For example, the appliance industry is linked with the packaging industry. So, even if the appliance industry goes well but the packaging industry does not or vice-versa, the supply chain or the market will be hampered.
Many entrepreneurs struggle to pay bills, workers’ wage, and rent instead of earning a steady income. These problems usually arise from late payments. In many cases, the customer wants to pay 30 days after receiving the invoice, and in some cases, 60 days after s/he receives it.
To mitigate this delay, s/he may need to bill every 15 days instead of every month. This is a breakdown of the wait time from one payment to the next. Another option is to require a deposit at the start of the contract.
Funding is an issue new and established entrepreneurs both face. If you are still in the early stage, you may be looking for an angel investor or seed funding. If you are an established entrepreneur, you may need to cover extra expenses or supply costs on time.
If inflation keeps rising in 2023, funding will keep getting more expensive. If you are going to use a credit line, you can improve its use 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 be wonderful only if s/he can survive the year by maintaining cash flow, no layoffs, and with proper fund management.
In 2023, we should not look for high profit margin, but focus on maintaining the business. Being a successful entrepreneur is possibly one of the most toughest career one can have but it is also the most satisfying career as well.
It is not the money which is most fulfilling, but it is the satisfaction of overcoming new and constantly emerging obstacles in creative and industrial ways. So, new entrepreneurs should not lose hope in 2023.
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 the Adjunct Associate Professor of SBE, Independent University Bangladesh.