Typically, this is the season when CEOs think about their strategy for the new year. They go offsite with their teams, hire a first-rate strategic planning facilitator, put sticky notes all over the walls, and then leave the session with a new and better plan.
Usually, they update their vision, mission and strategic initiatives, and pull together a detailed budget that promises to meet their new goals. The single biggest issue facing any organization today is finding, hiring, onboarding, developing and retaining great talent. As you plan you must pay attention to leadership and culture, if you want to find and keep great talent and remain competitive.
The wild card in the planning process is the impact of the economy on results. CEOs must make educated guesses regarding key details, such as interest rates, regulatory impact, stock market dips, changing demand, inflation, staff turnover, cyber security, tariff impact, the changing political environment and the rising cost of talent.
Their crystal ball is cloudy for a couple of reasons. First, our economic expansion has been continuing for 10 years. If you play the odds, there is a good chance that the economy is due for a downturn. We just don’t know when. Secondarily, many positive changes have occurred due to regulatory change and tax cuts. Our crazy political system has very little predictability, and CEOs are not quite sure what to expect in the future. The next big election is only two years away.
What should you do to prepare for this uncertain but seemingly healthy economy? Several weeks ago, I met with 50 CEOs and some great folks from U.S. Trust. We worked together to develop solid steps any business owner might want to consider. I hope these help you as you plan for 2019.
- Business is good. Now is the time to go to your banking partner and increase your line of credit. If the economy turns down, it will be much harder to find additional credit.
- Check those covenants. You should meet with your bank and work on revising and relaxing the covenants associated with your credit facility. It is a competitive environment for banks, and you may be able to find more flexible terms with your existing bank or elsewhere.
- Work with your bank to get off those personal guarantees. If your balance sheet justifies this option, now is the time to get this done.
- Expect wages to increase. Pay attention to your key talent and pay them so they will not be poached. It will continue to be a tight labor market.
- Think about growing through acquisition. More companies will be sold in the next five years than ever before. There is a lot of money available for the right plan for growth.
- As part of your strategic plan, improve your balance sheet. This will help you weather any economic storm.
- Cash is king. Work to define how much cash you need in reserve to operate if something unforeseen happens to our economy.
Every organization will have additional and thoughtful strategic initiatives for 2019 and beyond. Be sure you are looking around the corners and making good financial decisions.
Finally, I would always hope for the best and plan that something less than the best might happen. Work on scenarios in your planning process that anticipate results that are not optimal. Preparing now for the decisions you will make then will produce an overall less chaotic decision process.
John Dame is a CEO coach, executive team consultant and leadership strategist based in Susquehanna Township, Dauphin County. Visit his website at www.johndame.com.