As you plan for 2023 (whether starting or finalizing your 2023 budget), you will need to address the uncertainty of the current economic and market conditions.
There are many things still up in the air – with both supply and demand.
Some things have settled, while other components remain in flux.
How will you make next year as fruitful as this year, or even better?
As I organize my third-annual Financial Master Class, I have started to think about what priorities to focus on next year.
Here are some of the financial questions you need to wrap your head around…
(Print this out and give to each budget manager as a guideline to spur thinking.)
Managing the big non-labor costs
How much did material inflation impact your 2022 year, and how much do you predict it will impact your 2023 numbers?
- How did non-payroll overhead increase last year, and what do you expect to happen next year? These costs can sneak up on you.
- What mid-year cost rises do you expect next year? And conversely, how can you negotiate with your vendors in order to reduce your costs or increase your year-end rebate from vendors?
- How do you expect the supply and costs of trucks and equipment to impact your business in 2023 vs this year?
- Lastly, how will you budget for fuel costs? How accurate were you in your overhead recovery last year, and what’s your assumption this year?
It’s no longer enough to just raise your prices, you have to manage and plan for these changes.
How will labor factor into operations and growth?
What wage rates will you need to pay next year vs this year, versus the year before? Make sure you are getting a return on your labor investment.
Will it become easier to hire good people in 2023, or harder?
- What quality of person do you expect to hire next year vs this year?
- And how will you have to train them differently?
Are you planning on growing your middle management or sales team next year? Will you need to recruit them externally? To do that right takes money.
Preparing for revenue growth and shortfalls
Overall, how will the economy impact demand in the next 9-12 months, and how should you be prepared?
- Will we actually have a recession, like Jamie Dimon (Chairman and CEO of JP Morgan) is predicting? And how much will it impact you?
- How will your market react to your pricing; and how should you respond to prospects looking more closely at your bids?
- Will your maintenance clients curtail their enhancements spend, and what can you do to maximize their value and your contribution dollars?
- What will happen when the average size of install jobs drop in 2023? How should you pivot to deal with this?
Will your marketing sources from 2022 still work in 2023?
- What is no longer driving business?
- What’s the new marketing source that will open new markets?
Managing overhead while being tactical
You need a plan A, B and C. It may feel like guessing, but its better to have a plan before things get busy.
- Plan A: How will you keep growing through a recession?
- Plan B: If you find yourself in a revenue squeeze, how should you handle your overhead?
- Plan C: If revenue starts strong but then falls weak in the second half of the year, or vice versa, what will you do?
You also need to think “tactically” about your market next year
- How should your mix of services change, in order to take advantage of gaps in the market in 2023?
- Where do you see your competitors falling short in the coming year, and how will you be poised to take advantage?
The budgeting process can be improved!
Are you aware that the savvy budgeters have already put their draft 2023 budgets in place?
No matter what, you still need a closer look at what’s coming down the pike in 2023.
These are just some of the questions I have in mind to cover in my 3rd annual Financial Master Class
Your challenge: Don’t forget the long-term planning process while you react to the short-term economy.
The key to entrepreneurial growth is to keep your long-term plans in focus, as you make short term pivots
Your long term strategy may be personal and have more to do with succession planning. Or it may be more about “business” itself.
Here are 4 common strategic routes to grow your business. Which path are you on?
- Low cost provider
- Full service provider, often in a niche of some kind
- Best in class provider of a focused set of services
- A custom approach to your market based on owners assets, technology or talents.
As you gain financial clarity this winter, also take time to communicate your 3-5 year vision! This will help everyone stay on course as you navigate 2023.
Regards, Jeffrey Scott
P.S. The early bird for my 2 day virtual Financial Master Class event ends in just 30 days!