I look at every new year as something to leverage. You can be the fly or the windshield. I choose to consider internal, external, and innovative factors and turn the coming year into something I can better control.
If you fail to plan, you plan to fail, as the saying goes.
The challenge many owners and managers face is that they don’t think they know how to anticipate economic changes. Instead, they plod through each year as the victim of circumstances, hoping for a lucky day.
This is how I feel when I play roulette. Whether you win or lose at the tables is completely dependent on when you decide to walk away.
But you can’t walk away from your business, and companies that fail to predict income will fail to sustain growth.
Think about it: If every month is a surprise, how should you staff your business? How much gear should you own? Should you move to that new building?
Reactive companies tend to stay the same size, which means that profits shrink steadily over time.
Become a planning company. Here’s how:
I look at prediction like it’s my job. You should too.
Here’s my process:
- First, I review what is going on inside my business. This defines the limitations and opportunities I need to factor into my forecast.
- Then, I scan what is going on around me. What are other companies doing? My clients? My suppliers? How will that affect my internal scan?
- Then, I factor in innovations or trends that may have positive or negative impacts on my assessment so far.
- Finally, I translate this into how it will affect my fiscal calendar.
Many of my clients have seen a huge increase in revenue and profit in the past two years. Tax breaks in the US have whetted owners appetites for profit.
Many companies are taking a more thoughtful approach to management. Less emotion and tradition. More responsive to trends and changes in society.
My Conclusion: The potential for scalable growth and profit is high.
Look at the size of your customers’ budgets. How far out are they planning? Are these data points increasing, stagnate, or contracting?
Are you seeing expansion or contraction in your target customer? What about your competitors?
Geopolitical and macroeconomic factors matter too. If I were based in the UK or dependent on that market, the uncertainty of Brexit would have me hedging all my forecasts and spending.
How do the US tariffs affect your customer channels?
My Conclusion: There’s a lot of uncertainty out there. Major companies will be pulling in resources and postponing major roll-outs.
Innovation refers to both what you can leverage and what you can create. Innovation stagnates in prolonged recessions but accelerates in prolonged upturns.
When the economy is in a tailspin, innovation may be your only hope for growth. You might be alone as you risk investment, but the potential payoffs are huge.
In growing economies, innovation favors the early adopters but the benefits smooth out more quickly as the market catches up.
Will new technology create demand or replace it?
Innovation can be internal as well. If you’ve just implemented a new ERP system and are already starting to see the positive impact on your business efficiency, client retention, and employee engagement… why not plan on leveraging that?
My Conclusion: Unless your internal innovation will drastically improve your scalability, it won’t be much of a factor.
My Predictions for 2019
Before I make my predictions, I collect all my data points and map them on a calendar to see what business cycle they will affect.
Q1 – Record-breaking spending: Business as usual, but based on Q2 predictions, I would choose to outsource rather than to add resources.
Q2 – I would hedge: Downgrade revenue forecasts to 2017 levels and hope for better. No need to reduce overhead, but watch the signs.
Q3 – I would downgrade until I see the beginning of Q2: If Q2 turns out better than planned, then Q3 is probably the time to hedge. If Q2 is soft as expected, the Q3 fiscal plan should be dialed back. By how much? That’s the right question!
Q4 – Anticipate a Recession: All signs point to a Recession this year or early next. If you adjust for it too soon, you will miss profit-taking opportunities. If you adjust too late, you might be faced with major decisions on cost-cutting.
I would welcome your insights and comments on my predictions. Visit AV-Matters.com and leave a comment.