Plan for change, the only certainty in business: The Whiteboard
We are nearing the final quarter of the year. The kids are back in school and football season is getting underway. In the business environment, more change is happening more rapidly than ever before. Now is the time to get serious about budgets and strategic plan updates for 2019.
How should the Trump tax cuts affect your budgets and strategic planning? It has been almost nine months since the cuts were signed into law. By now you should understand what the impact will be on your corporate and/or personal income taxes.
Whether your business is a corporation with a lower rate or an LLC with reduced pass-through taxes, you have the opportunity to invest more of your income back in the business. If you haven’t thought about that, you should. And you should adjust your future budgets and strategic plans accordingly. It’s great that you will have more after-tax money, but make sure what you do with it are well-planned acts of commission, not ill-planned acts of omission.
Also on the horizon are higher interest rates. The Fed funds rate has already risen from 1.25 percent in June of 2017 to 2.0 percent in June of 2018. If steady economic growth continues we can expect rates to continue rising as the Fed steadily reverses its quantitative easing program, cleaning up the $4.5 trillion of Treasury bills and mortgage-backed securities on its balance sheet. Rising rates will increase borrowing costs for you and your customers. How will that affect your strategy?
Tariffs should be an area of discussion and deliberation in both the short term of your budget and the longer term of your strategic planning. This is a difficult area for planning because so much is in flux. Some tariffs have been applied but others have only been threatened. Bilateral negotiations with China, Mexico, Canada, the UK and the EU may change the entire picture. But a lack of clarity now doesn’t mean you shouldn’t plan. If your business has exposure to tariffs on the sales side or the supply side, contingency planning will be important. How will you react if and when tariffs hit?
The historically low unemployment rate has made it difficult, if not impossible, for many businesses to find qualified employees. I hear business owners and managers complaining about it all the time. It is hitting them from two sides because not only is it hard to find people, but retention is increasingly becoming an issue. Employees are testing the market for higher wages and better benefits to a degree we haven’t seen in a number of years.
So what is to be done besides complaining? It may be time to consider more investment in productivity improvements so the business can do more with less. That might include technology investments, but it might also include a serious investment in training.
New employees will probably need more training. That might take the form of apprenticeships or it might simply be more rigorous and formalized job training than many employers have been used to providing. It could also include increased investment in training for existing employees to better utilize expensive equipment and software for which they’ve never been properly trained.
We’ve had many years of what was a pretty status-quo environment for business. Now we have taxes, interest rates, tariffs and unemployment rates all changing, and not insignificantly, at the same time. The time you spend planning should be directly proportional to the amount of change in your environment. Make sure your leadership team spends quality time planning for 2019 and beyond.
Richard Randall is founder and president of management-consulting firm New Level Advisors in Springettsbury Township, York County. Email him at firstname.lastname@example.org.