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Budget Planning For 2023 Despite Economic Challenges

By ITR Economics on August 10, 2022

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ITR Economics is the oldest, privately-held, continuously operating, economic research and consulting firm in the US.

It has certainly been a tough start to the decade for businesses. Beginning with the immense impact of COVID-19 and on to today, many companies are facing difficult challenges such as a tight labor market, higher interest rates, inflation, and supply chain issues.

In a recent survey conducted by ITR Economics and ButcherJoseph & Co., we asked more than 650 business executives about how each of these challenges impact their companies and their decision-making. ITR Economics and ButcherJoseph & Co. are here to help you with your budget planning for 2023 despite these economic challenges. Let’s take a deep dive into some of the survey results.

Impacts of Inflation

More than 90% percent of survey participants said inflation has some impact on their business, with more than half of all participants saying it has a great impact.

Inflation has been dominating the news headlines in recent months, rising to a level we have not seen in decades.

Many of our survey participants had concerns about how higher inflation will affect their business.

“I am greatly concerned with pricing products to a point where people refuse to buy them.”

– Anonymous survey participant

Even though inflation is likely to remain elevated throughout the 2020s, ITR Economics is expecting to see the rate of rise in inflation come down later this year and in 2023. Unfortunately, that does not necessarily mean prices will come down. Some industries will experience disinflation (a slowing in the rate of rise in prices) and others will experience deflation (actual price decline).

On a Positive Note: It is refreshing to see that while inflation is a pain point for businesses and consumers alike, people are still spending. The previously mentioned tight labor market also works in consumers’ favor, as real personal incomes are rising.

However, during the height of the pandemic, there was a surge of consumer spending thanks in large part to the government stimulus. Now, with the withdrawal of that stimulus and the return of personal savings to pre-pandemic levels, some market segments could be facing a recessionary phase.

The Cost of Employee Recruiting and Retention

More than 80% of survey participants said that the ability to recruit and retain talent in today’s economic climate is very important to their business.

Businesses are currently navigating a tight labor market, with nearly two job openings for every job seeker. Losing employees is already one of the most expensive problems you can have; finding replacements is even more strenuous in this tight market.

When an employee leaves your company, not only are you losing a productive worker, but you must now spend a great deal of time, money, and resources to successfully fill that role. You will need to:

  • Create a new job listing
  • Find great candidates to interview
  • Hope you find the right person for the role
  • Convince the right candidate that the open position is the right next step for their career
  • Start training the new hire to get them up to speed

Many people have left their jobs in recent years, whether due to the COVID-19 pandemic, to find a new role, or to start their own business. The good news is private-sector employment reached a record high in June. The difficulty is that there are not enough people to fill all the new and existing job openings being created in an expanding economy.

On a Positive Note: ITR Economics has been following their leading indicator data closely, and it appears as though a peak has formed when it comes to turnover. So, while there are still a large number of job openings relative to job seekers (remember that 2:1 ratio), it seems that the wave of employees abruptly leaving their current jobs is slowly abating.

Remember to be flexible and focus on keeping your productive workers happy. Not only for their sake – retention is very important to managing your bottom line.

“Good employees are the backbone of our business. We have a great product, but it’s dependent on the people process.” – Anonymous survey participant

Who Can My Business Turn to for Help?

Whether COVID-19, inflation, interest rates, supply chain issues, or something else, businesses have had to deal with so many bumps in the road. It is important to avoid getting caught up in the emotion of it all, and instead focus on the data. ITR Economics is well-versed in offering a helping hand in difficult times.

ITR’s online memberships and services, such as the Insider™ and Trends Report™, provide accurate economic insights coupled with actionable Management Objectives™ to give your business the edge over the competition. ITR also offers trials to give you the opportunity to try each service and determine if it is right for your team.

New tools such as ITR’s Custom Price Index service will also be crucial to businesses’ success in the 2020s. Built by ITR Economics experts, the Custom Price Index service could make the difference between profitability and losing money amid this decade’s elevated inflation.

More Information on Our Business Partner – ButcherJoseph & Co.:

If you’re considering selling your business, we recommend you work with an advisor like the professionals at ButcherJoseph & Co. One of the leading services they provide to clients is a complimentary feasibility analysis study.

This free service helps business owners learn more about the structure and results for shareholders, as well as the potential outcome for your management team and employees, if you were to sell your business to private equity, a strategic buyer, or into an employee stock ownership plan (ESOP) structure.

As you weigh your options, this complimentary analysis will help you and your team see the benefits associated with each transaction type, as well as provide you with insights into current market dynamics.

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