The end of 2023 is rapidly approaching. A lot has happened this year, some things we knew were coming, and some things came as a surprise. I suppose you could say that’s how most years turn out but this year seemed a little more unsettled.
By now you will have a good idea how your business did/will do this year and are probably starting to plan for 2024. Some of those unsettled things wreaked havoc on your business this year and some may still be in play as you build a business plan for 2024. Let’s take a quick look at a few of the variables.
INFLATION – It has come down from the four-decade high. It is still above the target rate hoped for by the Federal Reserve so more intervention is possible. Regardless, prices have not come down so the things that were costing more are still costing more. You may have built some cost escalation into your 2023 business plan but probably not enough to cover actual cost increases. As you prepare your 2024 business plan and budget you will no doubt take into account continued inflation. The same impact inflation is having on your business, it is having on your customers. As an example, a recent study by Bank of America showed Generation Z (born between 1997 and 2012) nearly 40 percent reported they had experienced a recent financial setback and approximately 25 percent said they have resorted to borrowing money from family and friends.
INTEREST RATES – In most cases, the increase in interest rates may not have an immediate impact on your business. A year ago the prime interest rate was 3.25 percent, and today it is 5.5 percent. The prime rate is what the Federal Reserve charges for money to other banks and large companies. Smaller companies typically pay a rate of two to three percentage points higher. If you have a credit line with a local bank or one of your distributors, you may have already seen an increase in carrying costs. If not, you will. Your business will be impacted by these increased rates in 2024, so no doubt you will build that into your budget for next year.
MINIMUM WAGE – A number of states have passed legislation raising the minimum wage, some with immediate implementation, some with implementation on January 1, some with both. Most likely this won’t be an issue with current full-time employees, though it could have an impact on planned wage increases or wage demands of current employees. If you were planning on part-time or seasonal help these new laws could have an impact and you’ll need to budget accordingly.
SUPPLY CHAIN – The movement of goods, all goods, was very difficult which led to shortages. Shortages led to price increases on items in demand and covered products across the board. Most supply chain issues have been resolved but if you still have products in short supply you need to factor that into your business plan.
Your business plan and budget should factor in the above and more. Just as important is knowing your customers are being impacted just like you. The magic comes from figuring out which ones are in play and gauging the impact on your customer base.
I wrote in a previous article the resumption of the federal college loan program was set for October 1. This will have a significant effect on approximately 43 million people as payments will be between $200 to $300 per month according to the most recent Federal Reserve data. Overall, it is estimated that a combined $10 billion PER MONTHwill be redirected to loan payments according to a recent analysis by JPMorgan. Without doubt this will have an effect on your business in the coming year.
At a recent conference I had a conversation with an industry analyst about the state of the American economy and how 2024 is shaping up. We discussed the things I’ve mentioned earlier in this article. Then I brought up the impact of the current UAW strike at Ford, General Motors and Stellantis (formerly Chrysler). At this writing, tentative agreements have been made with Ford and Stellantis. While those agreements still need to be ratified, the union has authorized their members to return to work at those two automakers.
What the analyst didn’t immediately see was the impact on other businesses usually frequented by those striking autoworkers and their families. Including restaurants, theaters, grocery stores, home improvement stores, and bicycle stores. Tens of thousands of people are on strike, not receiving a paycheck for over a month. Businesses that rely on autoworkers and their families as clientele are already seeing a decline in revenue, though that impact will be mitigated with the tentative agreements and return work directives.
As trying as managing your business in 2023 has been, planning for the coming year will be equally challenging. Making a plan is important but staying on top of performance and adjusting that plan as necessary is equally important. The variables listed here may not be everything you’ll need to consider but should give you a good start.
Contact Steve Bina: email@example.com