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A Real Time Pulse on the Economy

Labor Uber Alles

Title: Navigating the Economic Landscape: Key Insights and Strategies for Business Owners


I had a great webinar with the one and only small business guru, Greg Crabtree. Greg created the Simple Numbers framework and consults on business financial performance for hundreds of clients across the US. Over the last several years he has built a 100-company model which aggregates the performance of 100 of his clients and tracks it over time.

Key Takeaways:

1. Labor Shortages and Inflation:

- Labor shortages have emerged as a significant issue in numerous industries worldwide. The scarcity of available workers has contributed to increased wages and a subsequent rise in inflation.

- Several factors are driving this labor shortage, such as an aging workforce, lower birth rates, and a global population growth slowdown. These elements suggest that the labor shortage could become a lasting issue that businesses need to address.

2. Supply Chain Issues:

- The COVID-19 pandemic has had a profound impact on supply chains, causing delays and shortages of vital components and materials. As businesses grapple with meeting demand and sourcing materials from alternative locations, supply chain disruptions are expected to persist for the foreseeable future. Of course, we’ve seen prices come down and supply increase in many areas but shortages remain in key areas.

- To mitigate these challenges, companies should consider diversifying their supplier base, investing in technology to optimize inventory management, and reevaluating their sourcing strategies.

3. M&A Market:

- The mergers and acquisitions (M&A) market remains active; however, there is growing scrutiny on the valuations and pricing of deals. Buyers are increasingly cautious and prioritize the long-term cash flow potential of acquisitions over immediate returns.

- To navigate this trend, sellers should focus on showcasing the long-term value of their businesses, including growth potential, competitive advantages, and synergies that can be realized through a merger or acquisition.

Strategies for Business Owners:

1. Stay informed on economic trends:

- Keeping up-to-date with the economic landscape enables business owners to better anticipate challenges and fine-tune their strategies accordingly. Regularly monitor reliable news sources, and industry reports, and attend webinars or conferences to remain informed.

2. Consider the long-term impact of decisions:

- Amid the shifting economic environment, business owners must weigh the long-term implications of their decisions against immediate gains. This approach promotes sustainable growth and resilience in the face of uncertainty.

3. Be prepared to adapt:

- Flexibility is crucial for business owners as they respond to the ever-changing economic conditions. Adapting may involve reevaluating pricing strategies, exploring new markets, investing in emerging technologies, or even redefining the company's core business model.

  1. Automate, offshore, train, and measure:

    -Labor cost is driving inflation and businesses need labor to provide value. Automate what you can. Offshore what you can but these strategies have limits and new technologies like ChatGPT will take time to achieve savings. Increasingly you will have to train less experienced labor and you need to avoid paying too much for “experienced” labor that isn’t. Greg’s famous quote is, “Do you have someone with 15 years of experience or one year 15 times.” So measure constantly.

The New Rules