2023 in the Rear View and a Look Ahead
As we approach a new year, I like to take a look back at the factors in this current year that have most significantly impacted business, and how they might inform how we chart our course for the next.
Reflecting on discussions I was having with clients a year ago, there was significant uncertainty about how to forecast revenue in 2023. Business owners did not express a lot of optimism, expecting little, if any, growth. In general, that expectation came true. We didn’t fall into the big recession that was predicted by some at the end of last year, but we did not experience much growth.
2023 was a relatively uneventful year from a business standpoint. There’s always pressure about how much we should pay our people but there were no major triggers that brought about big increases, even though significant increases were fueled by labor shortages in 2022.
As I’m talking with clients about 2024, there seems to be more neutrality than anything else – no strong leanings towards optimism or pessimism. Expectations are around little to no growth, similar to this year, unless companies intend to expand their revenue options.
In trying to read this year’s tea leaves, I don’t see a lot of pressure from the economy to raise interest rates at this point. Inflation seems to be more under control. Gas prices are going down, and we are even seeing gas wars around the Denver area. Colorado is at its lowest growth level in a while. But the threat of recession is still with us. Another economic influence is that 2024 is an election year – which is typically good for business – but with this election come many unknowns. So, what’s the best approach to the new year?
From a budget planning perspective, there have traditionally been three scenarios to consider:
- What you expect to happen based on your best forecasting efforts
- A more optimistic outcome
- A more pessimistic outcome
I typically don’t recommend that clients prepare three separate budgets, but I suggest that you at least consider these three scenarios and think through what your actions will be in each case. Some questions to consider when developing your budget include:
- What are the most critical things you’d need to do if the economy goes either way?
- Will you need to add or subtract people?
- Will you need to beef up your sales department?
- Are you anticipating a slowdown in your industry?
- Do you have a plan to cut costs significantly if necessary?
- Where will you need to spend money?
- Where will you get money?
- Are there other revenue options you should consider?
- What’s your relationship with your bank?
This broader way of forecasting is more of a process than a formal plan. It considers the most critical aspects of your strategic plan and enables you to become nimble so that you can easily pivot when something shifts in the market, the economy, or in your business. A strategic plan can sometimes feel intimidating, especially when facing unknowns. My best advice is to have an annual plan but break it up into 90 day “rocks” or goals, to identify what you need to be focused on each quarter.
I’d welcome the opportunity to help you map out your potential scenarios and fine tune your plans for 2024. Contact me for a complementary consultation.
Thank you for the opportunity to work alongside you this year and for the trust and friendships we share. I wish you and your loved ones a joyous and memorable holiday and a happy and prosperous New Year.