Listen to this articleAs we head into 2024 with increasing economic uncertainty, business leaders need to reflect on 2023 and plan their actions for the new year.
Once you have a plan in place, you should treat it as a living document so that you can review it regularly and make changes as needed.
Tom Jordan, central Pennsylvania market president for Univest Bank & Trust, said the economy is not as “insanely good” as it was in 2021 or 2022, but it is normalizing to a reasonable level.
“Small and medium-sized businesses are still investing,” he said. “When interest rates were 3.5%, investment activity was hot. Now at 7%, it's not as hot, but it's still active.”
No one knows for sure whether 2024 will have a soft landing, but companies should reflect on what went well and what didn't last year before setting goals for 2024, he said. , said we should celebrate the new year.
“Make sure they are measurable and clear,” he said. “Instead of making grand plans, make them achievable.”
This includes reviewing the annual budget to see what is needed for personnel, equipment and, if necessary, acquisitions, he said.
“Pay attention to the market you serve,” Jordan advised. “If you're focused on Central Pennsylvania, look at the local economy. If you're dealing nationally, you need to look at what's going on in each region to understand trends like taxes and political issues.”
Jordan said if a company is selling in an area that is experiencing economic distress, it needs to be aware of that before making a plan of action and determine whether the market dislocation is an opportunity or a threat.
“Once the budget and market analysis is complete, create an action plan and make it a living document,” he said. “We need to meet monthly to review progress.”
It's important for the team to delegate specific tasks to specific people, and Joran said if something isn't working, it will become apparent quickly.
“Sometimes you have to change direction,” he said.
Jordan cited the banking sector as an example.
“The 2023 budget was written in 2022. Then in early 2023, three banks failed and all the banks had to pivot and reassess their current situation,” he said. “All businesses need to be adaptable and agile.”
Jordan said despite some economic uncertainty, decisions need to be made based on what the business needs. He cited rising steel prices and said if companies need steel, they should buy it now instead of waiting until the end of the year.
Jordan, who regularly meets with business leaders over breakfast, said he met with 10 outdoor living space business owners who manufacture everything from high-end pools and swing sets to mid-priced cabins and smokeless fireplaces.
“We talked about prices, wages, job increases, etc., and we got a general sense of how things are going,” he said. “It's helpful to hear what other people are doing.”
The biggest lesson for Jordan and his business colleagues is that manufacturers and retailers of luxury goods aren't suffering as much as those catering to middle-income customers.
He said merchants targeting middle-income customers have been hit harder by inflation and are feeling a drop in demand as they cut back on spending since incentives were ended.
“High-end swing set manufacturers said they haven't felt any pinch in demand,” Jordan said.
Another takeaway for Jordan is that everyone is still looking for workers, which he said surprised him.
“No matter who your customers are, everyone is looking for workers, even with subdued demand,” he says. “Some people are paying higher wages, and some people are not paying as much.”
He said office workers were becoming harder to find and managers still seemed to be demanding higher wages. It's easier to find people in the production sector, so wages tend to rise.
Jordan said the conversation around pricing was similar. Companies that work with customers who earn enough to buy what they want say prices may rise, while companies that work with middle-income customers say prices will remain flat. ing.
“There were some places that said they were going to lower prices because demand was down,” he said.
Jordan said all of these products were optional purchases during the pandemic as people stayed at home and demand for comfort and entertainment surged.
“Right now it's flattening out and people are turning to essentials, so demand for some products will go down,” he said. “Some people will continue to buy, and financing is increasing.”
Jordan said many companies raised prices early last year due to increased supply and wages, making it difficult to raise prices now.
“Most of the 2023 report is not yet complete, but 2023 appears to have been a good year,” he said. “But the inflation problem remains.”
Jordan said that from what he sees, fear of inflation isn't stopping businesses from making purchases, but it may be delaying them.
“If there's no need to make capital investments or start construction, then they might hold off to see if prices come down,” he said.
Jordan said he is fairly optimistic about the economy overall. The question is whether there will be a soft landing.
“There is less pressure to raise wages and supply chains are in much better shape,” he said. “Products are moving and prices are falling, especially for lumber and steel.”
When it comes to raising capital, Jordan encourages business owners to look at what the market is doing for their business.
“I don’t see any boom years or bad years,” he said. “A soft landing and lower interest rates would provide tailwinds in the second half of the year. If inflation remains unchecked, there will be headwinds. But inflation appears to be coming under control.”
