Our apologies for the audio issues early in the webinar. For a better experience, skip to the 22:00 minute mark, where the audio is clear.
Why does market volatility matter to your Business? As leaders, while we know we can't control those broader factors, it's our responsibility to make data-driven decisions to maintain the health of our companies and ensure profitability. As a growth consultancy, Red Caffeine looks at macroeconomic forecasts and global trends to help our clients build a Grow-to-Market™ plan that strategically addresses staffing, cost management, sales, and investments in technology. In this session of Business as "Un" usual, our panel of industry experts, Jason Turner, Terry Bressler, and Spencer Yurkowitz, dove into some of the unique factors we face in 2023.
Throughout 2021 and into 2022, inflation began a steep climb. The U.S. government tried to prevent recession by infusing stimulus money into its economy and lowering interest rates. In 2020, we saw record high and historically low unemployment rates, resulting in an employee market and increasing wages. With a higher money supply in 2021 and early 2022, both business and consumer spending rose. Unfortunately, printing money is not sustainable, and the money supply changed significantly in 2022. We are now in the worst liquidity market ever. Liquidity is rapidly draining out of the financial system due to the combined effect of the Federal Reserve's quantitative tightening program and more significant than predicted U.S. budget deficits.
Another area for clarification is what we see in the labor market. Amazon, Salesforce, Morgan Stanley, and just today, Alphabet, Google's parent company, have all announced plans for significant layoffs. Despite these layoffs, the job market shows signs of strength, ending at a 3.5% unemployment rate in December 2022. While these stories are grabbing headlines, it is essential to note that the labor market is significantly larger and has been healthy for years. Logic says that many people who find themselves unemployed should be able to find an open position easily. Time will tell if the layoffs will provide the right workers for these available roles.
We also looked at the M&A Market, and while valuations and deal volume declined over the second half of 2022, deals continue to get done, and valuations have held firm. If you look at the Private equity market, the professional buyers and sellers, for a pulse on what to expect this year, selling volumes are down, but there is still a lot of deal activity happening. Financing issues and lowered earnings will likely play a significant role in the viability of mergers and acquisitions this year.
Our panelists agreed that all signs point to a recession in 2023, with the highest probability - over 60% - of it happening in the year's second half. Jason Turner, the Chief Investment Strategist of Great Lakes Advisors, stated his expectations for the recession to be short and shallow. Although the consensus was that it is hard to predict the significance of an economic downturn, businesses should plan for a mild recession.
How can leaders use this data to adjust their growth strategy for 2023?
- Outsourcing - Cut or reduce business expenses by looking at fractional staffing options. Outsourcing accounting, recruiting, marketing, and other essential business functions can be more cost-effective than keeping these roles internally. It can provide you access to more specialized skill sets, increase flexibility to meet changing business conditions, and accelerate business performance.
- Automation - Automating tasks can save time and reduce costs, so look for repetitive work that you can streamline with automation technology, custom software, or system integrations. Automation can help you stay leaner and more profitable during difficult economic markets and optimize your operations to accelerate growth as market conditions improve.
- Merger and Acquisition - As the deal volumes decline, there will be more opportunities to grow through inorganic channels. This is a chance to decide if you should build or buy. Create your wish list of desirable characteristics much like you would like for an ideal client profile, consider strategic partners that already provide good synergy, and, depending on the deal size, engage a firm that specializes in financial advisory services, like Prairie Capital Advisors, to help you manage your acquisition strategy.
- Employee Retention - Recruiting new employees has a high cost. It continues well beyond finding the right-fit candidate. Many organizations report that it takes over a year to get an employee fully onboarded and to perform at the level of their more tenured peers. Keeping your valued team members informed, happy, and appreciated provides stability during challenging financial times.
Knowledge is a powerful tool in your business strategy, but you don’t have to go it alone. Growth is a choice, so if you are still unclear about where to start and what to invest in this year, let’s connect!