The good news? Last week there was some good news out of the US, apparently the latest economic data suggests that the US economy will avoid a recession, and in Australia, we have had a second month where interest rates rises have been on hold. This is great news for us as consumers and business owners. However, there is a fly in the ointment, over the next few months a significant number of homeowners will be removed from their old, fixed interest rates of between 1.9 to 2.5% to the current average taken today where loan rates = 6.12%. If we take the average home loan at between $700,000 to $800,000, and the interest differential of around 4%. By my reconning, this equates to between $28,000 and $32,000 dollars a family will lose in discretionary spending over a 12-month period. This is a lot of coffees, take put meals, home renovations and holidays.
While the international economic forecasts bods well for the future, our local economy will be more driven by local circumstances such as the reduction in discretionary spending than what happens in USA, Europe and Nort Asis.
What does this mean for business, well business’s needs to look at how they can improve customer value by provide products and service that differentiate them from the recent past. This can include improving quality at the same price, reduce price, but retain quality or improve access to their products or services.
If you are interested, research the value triangle to see what constitutes customer value and then review operations to see if the business can change the way it operates to meet the value criteria.
From a professional perspective, it is worth while conducting a business review that will include financial performance, productivity and efficiency analysis and product and service delivery.
Once the business has completed the review, then and only then can a business commence the planning to institute change management.
There are a number of great consultants in Australia who can provide assistance in this field, and if you are interested, then log into the Institute of Management Consultants (https://imc.org.au/) and review their membership for a list of individuals who can provide assistance.
Small to medium businesses are more at risk than larger enterprises due to the lack of analytical expertise within the organisation. However, as we have seen recently with the construction sector, larger businesses are not immune from failure caused by market economics driven by the supply/demand challenge.
I can say, that unless the market is an innovation or paradigm change, then businesses that are market leaders, innovative in their management approach, willing to invest in monitoring and managing market performance will always prevail. However, those businesses that are not willing to invest in capability to manage market performance and maintain leadership in business performance are at risk of failure. We know that the top three causes of business failure in Australia are Cashflow, financial management and strategic planning. These three have been at the top for at least 12 years, and only have changed position.
Getting a handle on market performance, willing to institute change and implement a business improvement strategy will reduce the risk of failure.
The good news is that we can change and manage our business better to meet these challenges.
If you are interested in contacting me to discuss details, my email address is john@ctocsolutions.com.au.
Have a great day and good luck