Business Planning for 2021

2021 Business Planning Guide

What we knew has changed. It’s not bad, just different. The historical perspective is great but rebuilding what has been shouldn’t be the future. It’s been said a million times, “The New Normal”, which is loosely defined by everyone as what is most to their advantage, agenda, or viewpoint.

As companies go into their 2021 planning cycles there are more external pressures than ever facing them. Three forces outside your business, market, and customers that can’t be ignored but need to be weighed and measured on a conscious level are, Economic & Market Data, Political and Social Justice Impact, and finally Macro level industrial interests including Commercial Realty and the Investment community.

Starting first with the tangible facts. The headlines are dire, 4.1 million jobs lost in the Leisure and Hospitality industries, millions more in the other nonfarm segments tracked by the Bureau of Labor Statistics as of August 2020. Airlines made news again when they implemented cutbacks after burning through $25b in funding. Disney in the last days of September reduced 28,000 jobs.

Looking beyond those items the U.S. Federal Reserve has offered guidance that there will not be rate hikes until 2% inflation is reached and Vice Chair Richard Clarida indicated that full economic recovery maybe 36 months. Each Fed President stating the “additional stimulus may be needed” and intonating that it is small and medium businesses most at peril. Before running for cover it’s important to remember by many accounts that’s 6 years faster than the 2008 Mortgage crisis.

Often missed or not placed front and center is that over 11,000,000 jobs have already returned prior to September. To paraphrase the Federal Reserve “the hole was deep”.

Industries shift and while people are adversely affected it is a fact of economic life. Jobs are in fact returning with 750,000 added last month. Along with them the cycle of business innovation to drive recovery and growth may be in its early days but it has begun. While it is easy to try to pin consumer confidence as a leading indicator of job creation, “Full Employment” in Fed terms needs to be front and center. Yet more obvious credit needs to be given to what has improved in a more meaningful way. It’s a point to consider as planning begins in earnest. Yet as you look at 2021 don’t buy the upside without considering the downside. The stock market may not be the best indicator for the average business person.

Right behind the facts are the political implications. The U.S. the presidential election, in the U.K. Brexit combined with Prime Minister Johnson’s statements and a worsening infection rate loom large. Elsewhere in the world a variety of other unique localized challenges. Brazil, China, the list goes on. We may be living in bubbles but business by its very nature is still global.

Pandemic issues combined with recent tariffs and trade disputes under the current administration have shown the true vulnerability of supply chains. Supply chains are not fixed overnight. Factories are not built, raw materials are not always readily available. It’s more important than ever to consider the diversity of your suppliers, raw materials, and manufacturing locations.

Global trade is arguably a good thing, isolation is not. Countries and regions not prepared to engage will be left behind. Some may do it solely on their terms, others may continue to shift relationships toward transactional rather than strategic like the U.S. and India have done. None of this changes what has come to light. Single sourcing and limited supply chains that have a dependence on a single country, region, or materials source is a recipe for disaster. No matter how large that country.

At the consumer level, it’s been, toilet paper, beef and chicken, a shortage of cans for soda, and sanitizer/cleaning products. Unexpected demand outpaced projections. Where we worked, traveled, and ate caused the need for shifts in the supply chain from one type of establishment or another to retail consumption. Items were needed in homes instead of businesses and public facilities.

How and where people work and learn is equally significant. As you look toward your customers and their needs these factors need to be considered. Historical trends and data sets are vitally important but will fail unless new dependable factors, reliable information, and a new lens are used in the process. One that takes the impact of the pandemic and looks at it as a going-forward business condition for the foreseeable future.

An example is the already gained benefits in the PC and Tablet segment. The lockdowns and shift to virtual school drove demand that exceeded expectations for annual levels early in the pandemic. (Note: Cleveland Research projected a 7% decline YoY in 2020. Revised projections are a 2% Decline annually as of June 2020). There are still shortages and some schools have delayed all or portions of the academic year due to shortages.

The manufacturing, raw materials, and resellers of this equipment can not assume that the business is in anyway repeatable. That a worsening pandemic and additional restrictions in the near term would produce the same demand and results. Yet many will commit to plans looking to drive YoY sales growth in that segment when a shift to support, ancillary products, and improved security would be a prudent approach. Bluebirds happen, but not predictably in terms of revenue and Year over year growth.

The outside financial influence of others is insidious. Commercial realty is under siege. This is an alarmist and self-serving prophecy of commercial property holders who are protecting their interests by trying to keep occupancy rates high, rents up, and profits strong. If workers don’t return in mass their clients will need less space or none at all. Their assets become less valuable, rents go down, property values will diminish, tax bases will fall. People will use fewer nearby sandwich shops and yes there is a follow on effect. It doesn’t consider that more than likely that money saved by companies and the employees themselves will simple be spent elsewhere. Perhaps nearer to their home, on a larger home, on remodeling, and in time maybe even on travel and vacations. As you plan your 2021 lookout for your interest more than usual and be wary of the agenda of others.

Supporting local businesses is a good thing. Doing so at greater health risk to the overall population is irrational and governments looking after their own interests and tax bases are acting irresponsibly is not unethically. Mix this with the commercial property holders and they should be deemed in league together. They are the main propagators of protecting the status quo of their tax base. That is not innovation. It is protectionism.

The answer is not encouraging employers to reopen offices sooner. That will bring more people in via public transportation, and having them crammed in line at the deli. It’s good for what was but is not the innovation needed to develop a future state. Instead, companies should disregard these ideas and focus instead on where the opportunity lies, in the short of where and how work is done.

A vaccine is not an immediate fix, it will take months if not years to be distributed. Telecommunications / High-Speed Internet in the United States is strained and a permanent shift in working and learning locations for millions of citizens will tax the antiquated infrastructure even further. Deregulation and open market competition needs to be considered.

Any solution though would take years to implement and bring into effect. There is no doubt that overall spending has changed. Consumer demand so far has remained strong in housing, durable goods, Automotive. And a variety of other segments.

There are economic and political implications to all of these but the fact remains a simple case of supply and demand. If free-market capitalism has taught us nothing else it has shown that new and innovative solutions will be found when others fail. For 2021 don’t bet on what was and begin to build what will be.

Resources

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200827a.htm

https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-strategy.htm

https://www.bls.gov/web/empsit/ceshighlights.pdf

also referenced was Bloomberg – Clarida Interview Sept 22 Aired live at 8:00am Eastern. Then entirety of which is not available in front of a paywall.

We appreciate our clients. If you would like to become one or discuss how we can help in your 2020 planning you can book an intro call with Tim .

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Tim Kubiak

Business Geek, Nomad, Aging Metal Head, Nerd, & Coffee Addict. plus the only big guy at Hot Yoga with 25 years of Sales and Leadership experience in organizations of all sizes.

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