If surveys of business confidence are to be believed, 2017 is going to be a year in which companies will be spending their cash. Small-business optimism soared after the 2016 election. The overall optimism index in the National Federation of Independent Business's November 2016 survey hit 102.4 post-election, up from 95.4 before the vote.
What's more, the cash that companies have been holding has reached record levels. BlackRock, a huge money-management firm, reported in November that global companies are sitting on a whopping $50 trillion in cash.
The rise in optimism could ignite those hoards of cash into a conflagration of spending and borrowing that would accelerate economic growth. While this could cause economic trouble down the road, that growth means your company will face different opportunities and threats this year than it did in 2016.
Although each industry is unique, there are general opportunities and threats likely to affect all companies in 2017. Here's how your company should spend its money to capture the opportunities and deal with the threats.
Opportunities
Bigger customer budgets
One of the biggest opportunities created by increased optimism is that businesses and consumers will have a greater appetite to spend. Spend your money on advertising, sales people, geographic expansion, experience development, and capital raising to capture a share of those bigger customer budgets.
1. Advertising. You can get an attractive return on investment from buying the right kinds of advertising. First, analyze which groups of customers buy your product, why they buy, and what media they like to consume. With that information, you should be able to create the right message to reach them when they are getting ready to spend.
2. Sales people. While I have seen a few companies that build products that sell themselves, most need sales people to boost revenue. If you want to capture a share of growth opportunities, you should spend money on great sales people. If you make the right hiring decisions, your company will grow faster.
3. Geographic expansion. One of the most common ways companies grow is by finding new customers in parts of the world where they don't already operate. To expand geographically, you can give your sales people bigger travel budgets, or open up a sales office in a new geography or partner with a distributor there.
Urge for experiences over things
Millennials are the largest demographic segment, and they are likely to enjoy a boost in their incomes as employers compete for their services. This means their preferences will become bigger opportunities.
Of those preferences, one of the most significant for your business could be Millennials' desire for experiences over things.
If you want to capture a share of their budgets, this could mean looking for ways to offer your products in the context of an experience. For example, rather than selling skis, you could sell ski weekends in which your skis would be a part.
4. Experience development. To make such a shift, your company should spend on hiring people who can conceive, market, and deliver such "experience" services.
Easier access to capital
The constraints that keep equity and debt providers from writing checks to companies are likely to loosen up this year. That's because leading capital providers will invest more aggressively, enjoy highly visible wins in the initial public offering market, and fear that they are falling behind unless they follow their peers.
5. Capital raising. Your company should spend time and money to meet with such capital providers, present your case for capital, and raise as much as you can during this period of loose money. If you succeed, you should be careful how you spend the funds so you can survive the inevitable shakeout that will follow the bursting bubble that looms ahead.
Threats
Competition for talent
With the unemployment rate at 4.6 percent and a likely boost in economic growth, your employees could find themselves in high demand from other employers.
If this happens, you could lose your best people even as your need for their services increases while your company seeks to satisfy growing customer demand.
The combination of losing talented people and rising revenue could threaten your company's profitability and even endanger its reputation.
Fortunately, there are ways to protect your company from this threat.
6. Create a compelling culture. Small companies offer talented people a chance to make more of a difference than they could in a large organization. You should spend 20 percent of your time creating and cultivating a culture that attracts and motivates talent.
7. Pay referral bonuses. You can boost the odds of keeping your best people and bringing in new talent by paying bonuses to employees who refer new people your company hires.
8. Build an onsite health club. Another way to keep employees happy is to provide them with a place where they can exercise during the day. If you don't operate an onsite health club, give employees membership discounts at nearby clubs or open one in in your building.
Rising employee pay
Even though money is not the primary motivator for employees, people still need to pay their bills. Moreover, inflation is likely to increase, which will put more economic pressure on your employees and make a higher paycheck more compelling to your talented people.
9. Make your pay competitive. Keep track of how much your competitors are paying people and make sure your company pays as much if not more.
Spending on these nine things will help your company capture the opportunities that lie ahead and protect itself from threats.
Source: http://www.inc.com/
Image Credit: Getty Images
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
No comments:
Post a Comment