Business plans for a better future in 2024

Economic growth continued to be strong in the fourth quarter of 2023, contradicting many predictions of a recession, including mine. We may have a few more quarters of slower growth, and the possibility of a slowdown, but mostly the growth trajectory. Business leaders in the dark must rethink their approaches to labor, capital investments, and financing.

Growth in gross domestic product, GDP adjusted for inflation, came in at an annualized 3.3% in Q4. Our long-term compound growth over the past two decades has been 1.9%, so we did well last quarter, and that's coming off a very strong 4.9% growth in Q3.

Labor markets will tighten

Employee recruiting and retention news should top the list of many business adjustments. The labor market has been softening in recent months. Unemployment has risen slightly, but monthly figures show continued gains in net job growth.

The good news for employers comes amid a decade of slow growth in the working-age population. Companies must return to their previous tight labor mentality. Perhaps „labour hoarding” goes too far; It is the practice of hiring in anticipation of future needs. But for real openings, it makes sense to hire sooner. Work on employee retention A tightening of the labor market again will pay dividends.

Capital investments to increase productivity

Many companies have reduced their capital expenditure plans in 2023. Anticipated slower growth or negative growth – less demand for new capacity. Interest rates were high and some schemes did not pencil out. And banks tightened their lending standards, hurting even businesses willing to pay higher interest rates.

Now it's time to put those projects back on the to-do list. Future demand is better than ever. More importantly, programs to improve labor productivity coincide with possible tightening in the labor market.

Long lead times for some equipment can annoy those who pull the legs to increase efficiency and productivity.

Talk to the bank about the loan

We don't have data that banks are easing credit standards, but that will surely come as long as the economic environment continues to improve. Many business owners spend very little time talking to their bankers. The topic of conversation should be less about golf and more about creditworthiness. Great questions to ask about the bank's view of the company's finances. Is the bank willing to lend? If the company finds good opportunities, will it be willing to increase its line of credit? Will credit availability decrease after a bad quarter?

When talking about loans, don't neglect to ask about interest rates. They are negotiable, so ask. When the economy improves, banks tend to reduce their markups. This is called the „spread” over their cost of funds. It may be too early to get the best interest rates, but keep the idea in mind if the outlook for the economy continues to be solid.

The US economy is not booming. The big change is one of expectations: they used to be weak, but now they're moderate. That change should prompt some tactical changes in business.

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