S6E2: Trump Tariffs and How They Affect Business Owners

Disclaimer: The information in this video should not be viewed and is not intended as tax/financial advice. Consult with an expert before making any decisions regarding your finances. 

Trump Tariffs! As a business owner it is ESSENTIAL that you understand how the new policies could affect you, your business, and your cash! This week Pam is breaking down all of that and MORE! 

Transcript

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Lets talk tariffs. So essentially it does look like maybe the tariffs that were threatened at the very high rates for Canada and Mexico and a little bit lower for China are sort of in discussion right now. But I want to talk the hypothetical. What will happen if tariffs are put in place that affect imports into the U.S. what does that mean for a small business? So just really quickly, what is a tariff? It basically means that if you are importing something as a business owner from a country that has a tariff on it, they are going to have to pay a certain amount over and above the cost of the product to allow it to get to your distribution or warehouse or wherever it's going. So what normally happens with a tariff in that situation is whoever that vendor is that might be in the country with the tariff is going to add that or some portion of it to the cost of your welcome Back Cash Flow podcast season six where we talk everything small business finances, cash and strategy. Glad to see you here today. We're going to dive into something that is just unavoidable right now and that is the impact on small businesses of Trump's economic policies. I'm going to talk about one big one today, kind of the one that everybody knows about tariffs, what you can do to not just deal with, but let's say leverage and leverage opportunities and avoid the pitfalls of what could fall out of the whole tariff thing that's going on. So I want to jump into that. But just to let you know, there are a number of other economic policies that are a little bit of a smaller discussion point. We'll integrate those into cash flow podcasts moving forward as they go and talk about strategies you can put in place to either leverage an opportunity or, or beware of a potential pitfall for small businesses, depending on what you're in. And I want to say up front here, this is 100% apolitical. I'm going to be expressing some opinion, but it's not opinion on politics, it's opinion on economic impact. And I may be right and I may be wrong. So know that going into this and also, you know, this is not financial or tax advice in any way, but let's talk tariffs. So essentially it does look like maybe the tariffs that were were threatened at the very high rates for Canada and Mexico and a little bit lower for China are sort of in discussion right now. But I want to talk the hypothetical. What will happen if tariffs are put in place that affect imports into the U.S. what does that mean for a small business? So just really quickly, what is a tariff. It basically means that if you were importing something as a business owner from a country that has a tariff on it, they are going to have to pay a amount over and above the cost of the product to allow it to get to your distribution or warehouse or wherever it's going. So what normally happens with a tariff in that situation is whoever that vendor is that might be in the country with the tariff is going to add that or some portion of it to the cost of your. Whatever you're buying from them. So long and short of it is a tariff on a particular company where you have somebody that you get supply from, your prices are probably going to go up. Okay, that's the very simple piece, and that's easy to say, but then you all shoot. What do I do about that? I kind of like the concept because it's bringing up something that I advise business owners on all the time. And whenever I advise business owners on it, there's always. It's always one of those things like, yeah, I really should get to that. But right. There are always other priorities. We all know we're juggling a thousand balls at a time, and I'm just throwing in another ball. But the thing that I tell every business owner, whether they're a coach or they're manufacturing sauces or they're making furniture, every single thing that you get that's required in your business, critical people, critical materials, critical time. You need to make sure you have more than one source for that thing, because anything can go wrong. And I'll give you an example in. In almost everybody's case who listens to me, you do some sort of social media, either organic or paid advertising work. And we've all been victims of if, you know, Facebook's algorithm changes, Instagram's algorithm changes, Google all of a sudden starts changing what gets to the top of their page. We've all seen that stuff happen. And what, what we've learned, I think most of us, is that you never want to be in just one of those platforms or you never want to be in two of those platforms that are owned by the same person. And the reason that's important is because those things can happen. And you know, you can see, you saw it, man. When TikTok almost went away, which I have a whole theory on that, which you can see on my. My Facebook page. But when TikTok almost went away, there were a lot of people who had very successful businesses based on TikTok that had it gone away, would have been trashed in One day. And I know of businesses going back four or five years now when I think it was Facebook, might have been Instagram, changed their algorithm and just tanked businesses right away. And it's really simple to say or know that, wow, if I'm spread out across all these platforms, then I'm going to be safe. Because if Facebook goes down or Instagram goes down because they're both owned by the same person, I'll be able to hit up in LinkedIn or I'll have, you know, Google stuff. But If Google and YouTube go down, then I can still have Facebook as my backup. Well, this whole tariff impact thing, and even without tariff impacts, because there are other things other than tariffs that affect single source providers, is you want to be reliant on more than one person, thing or person or thing for what you do in your business to provide value to your customers. So take that example I just gave of social media and back that up now to say that you are a plumber and so you only get your plumbing materials, your pipe, your whatever else you use in plumbing. That's a terrible example for me to use. But say you're a plumber and you get all of your pipe from one person. Say that person goes out of business, say that person decides to hike their prices unreasonably. Say that person imports their stuff from China or another country that could be tariffed and all of a sudden your prices could go up to the point where you can't charge enough to your customers to cover those prices. Okay, say that you are manufacturing barbecue sauce and you import your jars and your lids from a country that's tariffed, all of the sudden that price could go up now 10, 25, 30, 40, 50% in some cases. I've even heard talk of 100% tariffs. And if that happened all of a sudden, the price of your jars would double. Now you can't afford, you'd have to go out to your customers and pass that along. And having been in this sort of a business situation before, before as in advising somebody, we made sure we had double source because you can't pass that on to your customers all the time. You might lose them. And as you get bigger and some of your customers become these things like a Walmart or a Target or a Wegmans or you know, even, even a smaller type local company, why a lot of stuttering there. As that happens, they won't accept your price increase. Because guess what, there are a lot of people who make barbecue sauce. And some of those people are not Sourcing their jars from the same person you are. So that's just a few examples social media, plumbing and barbecue sauce, where what you want to do, even if there aren't tariffs, is have more than one source for the things that you rely on. And one final point on this, that goes for people too. Okay. I run a bookkeeping business. I have a number of bookkeepers. And I need to make sure I love every single one of them. And I hope they stay with me forever. That would be amazing. I'm very picky about who I hire. I'm very. They're very picky about how they do their work. And we make sure that we're the same kind of picky before I hire them so that our clients get only white glove fantastic bookkeeping service that they can rely on week in, week out, month in and month out. Given that I need to make sure that I don't just have one bookkeeper because anything could happen with one person. I hate the they get hit by a bus thing. So let's be a little more positive and say they win the lottery. And when they win the lottery, they've always wanted to be that full time stay at home mom, as much as they love accounting and bookkeeping, now they've got the opportunity to do that, maybe even have a couple more kids, whatever it might be. I could lose one bookkeeper for any number of tragic or wonderful reasons. So I make sure that I not only have a number of bookkeepers on hand at any point in time, but that I have a pipeline as well. So if you're in a coaching business or a service practice of any kind, always be looking at your own staff and making sure that you have not only diversity within that staff of geographic location, if that's practical age and where they are in life and what they're looking to do in life, all of those things are really critical so that you're sort of diversifying your exposure to any one thing, triggering one of them to leave, good or bad. So I hope that makes a lot of sense where this really applies across the board. But even more so right now, keep your eye on what's happening with the tariffs. If you import anything, or if your competitors might import anything. And you now have an advantage because you don't keep an eye on this. It's not just looking at your own shop. Look around at your competitors. I hate the word competitor. But the other people in your circles of what you do, industry, that's a better word. And know where you stand relative to them as Far as your supply chain goes and supply. By supply chain, I just mean where you get your stuff. That's a supply chain is a fancy word for where and how you get your stuff. And this is very similar to. I don't know if you remember back just after Covid, we had the whole backup in the ships coming across the ocean. It wasn't a tariff thing, but it was a physical thing. Somebody actually blocked the now, and all of a sudden nothing could get delivered. That would be a very good time to go. Oh, yeah, I've been watching this for a long time. Not necessarily thinking that a cargo ship is going to block a canal. That's not one I could have come up with. But things happen. So I knew who my secondary source was. Those were the companies that survived that catastrophe. People who had thought about secondary sources ahead of COVID were ones that survived that catastrophe when it first hit. So that's just something I really, really want you to think about. And I will call that, you know, don't be a single source company in any regard for anything critical to your operation. So that's my advice for today. We're talking a little bit about Trump and tariffs, but it let me get all the way onto a soapbox about something that I think is so critically important to you. So please drop a comment, let me know, subscribe, like, whatever platform you're on and if there's anything else you'd like me to break down for you or any other business strategies in reaction to economic policies, economic events, anything, I'm glad to jump in and cover it on our Cash Flow podcast. You all have a great week, and I will see you next time. E A G L E S Eagles.