Just for a moment, imagine that you are a character in your favorite movie or book. The story is developing, and events are unfolding around you. Which character would you be? How are you handling the issues at hand? There’s a strong temptation to place yourself as the protagonist – prudent, clever, honorable – whatever you regard as the highest Aristotelian virtue. Now take a moment to check that against reality and challenge yourself to do the same exercise in your business.
Below are three takeaways for business owners from 2019. If you haven’t stopped to address these issues, this is the perfect time to start. Perhaps you’re aware of these challenges at a theoretical level, but have been too bogged down with the day-to-day to give them attention (or worse, have willfully ignored them despite your better judgment).
Prudence, was said by Aristotle, to be the chief virtue; we’re hopeful this article nudges you towards living it out as you position yourself for the future.
Strong earnings continued in 2019 and signs point to another good year in 2020. This begs the question: did the media prematurely ramp up recession rhetoric? We’ll need to continue to monitor the economy due to the cyclical nature of markets and political uncertainty. The short-term outlook continues to be favorable with President Trump in the White House, but things may change post-election. Recession is imminent; it’s the timing of it that’s in question – so you should begin to plan for a softening market. Be sure to undergo a realistic evaluation of your business. Should you be positioning yourself for growth/acquisitions or future cost cutting/restructuring? See John Geraci’s December article for a deeper look at the topic: Are You Prepared for Economic Uncertainty?
A neglect of the details may have set-in as owners have sailed the winds of a strong economy to Treasure Island in recent years. With data analytics increasing in popularity, consider such analytics to identify leaks in current revenue streams or costs. Pricing needs to be maximized, existing product lines need to be evaluated and new opportunities should be considered and analyzed. Jewels of insight are often hidden in the data. The saying is faithful – in business you’re either growing or dying. Given the uncertainty of the times and depending on your individual circumstances, the ambition for aggressive top-line growth may need to be tempered, making it critical to identify areas to improve efficiencies. Analytics can help you accomplish this.
Unemployment continues to be at record low levels. The competitive market makes it hard to not only find, but also retain good employees. You will benefit from providing employees with increased flexibility (i.e. remote, flexible schedules). Additionally, many businesses are getting creative with compensation packages to keep top performers motivated or to infuse urgency in stagnant employees. A company’s work-force is generally on a bell-curve, with the highest performers being the top 20% and the lowest performers representing the bottom 20%. The remaining 60% hover somewhere in the middle. Don’t neglect the top performers under the reasoning that “they’re okay” – you risk disproportionately lowering productivity if you lose them. Incidentally, at the other end of the spectrum, managers can often spend too much time training or “dealing with” the bottom 20% when it could simply be time to move on.
Written by John Ead, CPA