|Word Count: 1,449
Estimated Read Time: 5 1/2 min.
Preparing for 2020
Companies in every industry have their own cycles and rhythms. In the retail sector, businesses ramp up during the fourth quarter to handle the holiday sales rush that pays for inventory ordered months before. On the other hand, builders and developers cycle down at year-end to take account of the building season that just ended. Regardless of what industry or sector a business is in, every organization should spend some time planning for not just the end of the quarter but the end of the year and decade, which is right around the corner.
Issues that May Likely Affect Businesses in 2020
There are some factors that every business should take into account when considering expenses, opportunities and threats in 2020 and beyond.
- Interest rates – Interest rates are still extremely low, making real estate investments more attractive. A business that is leasing space might consider buying property while rates are still so low. Capital improvements can also be more cost effective with low financing costs.
- Unemployment Rate – The tight labor market might make expanding a business more expensive in 2020. It also makes retention more costly as salaries inch up to keep valuable employees in place. Companies need to consider this when considering expansion of divisions, departments and teams.
- Tariffs - Tariffs and international trade conditions could trickle down to affect small and medium-sized businesses in 2020. If the price of equipment, raw materials or imported retail goods fluctuate in the coming year, leaders need to consider how that could affect growth and profitability.
- Cyber Threats – This issue will be a critical one in 2020 and for the foreseeable future. Cyberattacks continue to increase. And, hackers are now increasingly targeting small and mid-sized businesses, not just governments, municipalities and multi-national companies. In January 2019, cyberattacks resulted in over 1.7 billion records leaked in various data breach incidents. What is worse, over 60% of small businesses that fall victim to security breaches go out of business within six months.
- Automation – Companies are going to need to think about how many roles could be replaced by robots and software in the next few years. It is estimated that about 25% of jobs may be at risk from automation. These are tough decisions that business leaders will begin facing in 2020 and beyond. However, automation could be a good thing for a company’s profitability. It could free up employees from boring, repetitive tasks and allow them to focus more on creative and skilled tasks.
- Disruption – Besides automation (the ultimate disruption), businesses are bound to face other types of disruption in the near future. In fact, industries thought safe, including vendor services and finance, are fighting for relevance. In the next 5-10 years, the business landscape will be radically different. Solopreneurship. Compliance. Outsourcing. Cashless society. 3D printing. Social marketplaces. Quantum computing. The list of disruptors goes on and on. There is no way to stop disruption in its tracks. However, companies can actively prepare for it by being aware of the drivers that cause it and how best to respond. It is up to business leaders to equip teams to deal with the uncertainties brought by disruption so employees can see them as opportunities, not threats, when (not if) they do happen.
From a financial perspective, the purpose of planning is to reduce uncertainty and increase options and flexibility. Businesses should be thinking now about cash flow cycles, capital expenses and major changes they want to make in 2020. Financial issues on the horizon could include a loan to buy or build a new location, capital expense financing for new equipment, increased lines of credit to cover higher inventory or new hiring, sale of a business, adding a partner or retiring one. Companies where those are possibilities should meet with a financial planner or banker to discuss options and begin preparations.
Here are some To Dos:
- Review the past year. A previous year’s performance can help determine how much to invest, and in what, to grow profitably.
- Factor in current market changes looming. While previous performance provides a baseline, expectations should be adjusted for today’s conditions. Labor availability, interest rates, and current tax rates change the equation.
- Look at business structure and taxes. A review of these now offers a chance to not only affect this year’s tax bill, it can help change the business’ status before 2020 starts.
- Set goals for the year and consider what items must be considered to achieve the goal. Planning for growth or change requires synchronizing several streams of financing to ensure all the pieces are in the right place at the right time. If the goal is to increase sales, leaders need to ask: “what will it take to boost sales X percent?” Will that require more inventory or employees? What were margins in the past? If the goal is to open a new location, the company needs to start doing its due diligence a year in advance and speaking to its banker six months before it plans to open doors. And, if that expansion requires new staff, leadership needs to work backwards from when they want to open to ensure they can recruit, hire and train the staff needed in time, and consider how to pay for that staffing. If the goal is to buy new equipment, which may be expensive, there is a need to research financing and balance sheet opportunities before making those capital expenses. A piece of equipment that is expected to last 10 years can be amortized over time and generate a tax savings for years to come, paying for itself thanks to currently low interest rates.
Run of the mill business security measures no longer suffice. Companies need to invest in cybersecurity in a serious way.
Here are some To Dos:
- Check what protections are in place and what vulnerabilities remain.
- Protect workstation and endpoints using anti-malware and antivirus software that feature real-time threat removal and ransomware protection. This blocks encryption attempts from successful execution.
- Install camera and microphone protection to guard user privacy.
Sales and Marketing Prep
To attract, nurture, and convert leads, all businesses will need access to marketing and sales technology that can automate certain tasks while streamlining others. Technology will allow a business to grow, create relationships, strengthen the effectiveness of the organization, and improve the way it communicates with prospective clients. It is essential for increasing efficiency while staying on top of the competition. To that end, the number one way for a business to plan to improve sales and marketing in 2020 and beyond is to ensure that the business has the right tech tools for efficiency and effectiveness.
Here are some To Dos:
- Determine if the company’s CRM system is adequate. Old systems were used to keep track of customer records, but offered only a basic way for brands to communicate with clients. However, CRM system advances now allow sales and marketing teams to use individual customer data to scale communication using real-time messages, dynamic content, and more. The goal is to deliver an unforgettable customer experience while harvesting the right data to use for ongoing optimization, increased sales and improved year-over-year growth.
- Find a single platform that allows the business to create and optimize content, nurture leads, monitor contacts and manage the process in which they nurtured in order to convert and keep customers while assessing the progress of the overall marketing strategies being used
- Determine if the tech will cut costs. The main goal for any business is to hit sales targets and improve the bottom line. The average sales team spends over 80% of its time managing leads, including time-consuming tasks such as lead scoring, segmenting leads, writing custom email marketing messages to individual leads, and staying on top of the engagement by responding to each in a timely manner, with the right messaging. With the right technology, a sales force could increase its conversions 400% through greater efficiency.
- Vet every lead. Businesses waste huge money mismanaging leads. Time is spent on contacts that are poor quality while qualified leads likely to convert slip through the cracks. With better technology, sales and marketing staff can ensure EVERY lead is properly scored and segmented.
There are, of course, a myriad more things every business can do to plan for the upcoming quarter, year and decade based on its own industry needs and reality. The key is to give it some thought and sketch out a plan to address every issue in a systematic, measurable and focused way. That’s how a business ensures it is able to not just survive, but thrive, in the next decade.
Quote of the Week
“Knowing is not enough; we must apply. Wishing is not enough; we must do.” Johann Wolfgang Von Goethe
© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.