What Business Owners Need to Know for a Successful 2024

What Business Owners Need to Know for a Successful 2024

Check out the latest episode below. Mr.Biz Radio provides business owners with the knowledge and insights needed to drive their companies forward.

Mr. Biz Radio: What Business Owners Need to Know for a Successful 2024

Unedited transcription of the show is included below:


Welcome to Mr. Biz radio, Biz. Talk for Biz owners. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz, Ken Wentworth.


All right. Welcome to a year end special. Could you tell, right going thousand and 24 here, 2024. So I've been on this for a couple of years. I like to do the last show of the year. This one will come out on, I believe, December 29, going through what you can expect from the economy, the levers that impact business owners, et cetera, kind of what's going on right now, what to expect in 2024. And then we're going to talk about some opportunities to make sure that you're looking at based on how the economy is going to go and things like that.


So this could help you get a guide a little bit on what to expect. So things I'm going to talk about during this show. First of all, we're going to talk about interest rates. They've been rising like crazy over the last 18 months or so. What's going to happen with them during 2024? Consequently, unemployment rates, where are they going to go? What should we expect from that? What impact is that going to have on the labor market?


Inflation? These are all hot buttons, right? I get asked these questions all the time. So like I said, I said I like to do a year end show on this. We'll talk a little bit about supply chain, not a whole lot to mention there, a little bit about the stock market, what to expect there. And then, like I said, we're going to talk about some opportunities to make sure that you're seizing in 2024. So that all being said, let's get started with interest rates. So just a little bit of a sort of a 101 interest rates, the Fed rates, I should say.


And that drives pretty much all interest rates. Most of those in the United States are driven off of the Federal Reserve rates. And that's set by the FOMC. That's the Federal Open Market committee. They meet eight times a year, roughly every six weeks or so. They just had a meeting literally yesterday, and they left rates flat, as they have done since, I believe, August. They kept things pretty flat since August.


So. Right. Should also mention their goal, the FOMC's goal. So people say, well, how do they even determine when to raise rates? By how much, et cetera. So their goal, literally, their stated goal since the FOMC has come into fruition is they want to have stable prices. Right? So they want to keep inflation, you don't want deflation, but you want to keep stable prices, you don't want it crazy, and you want to maximize employment.


Now, again, those can be broadly defined and depending on what side of the coin you're at, but those are their goals and that's kind of how they look at it. So consequently, as you might guess, they will increase rates. If inflation is high, they'll increase rates. Right, to bring inflation down. And then on the flip side, in regards to employment, as unemployment gets high, they're going to lower rates and that tends to bring unemployment down.


So it's a huge balancing act, right, as you can imagine. And that's why it's so confusing to so many people. And again, I don't mean to be like tinfoil hat guy, I'm going to be 2024 glasses guy here. You got to be careful about what the media is telling you because there could be an angle depending on what channel you're watching, hint, hint, nudge, nudge, and what agenda they're trying to push. So that's very important to keep in mind as well. So that's why I like to put a little background and framework around it. So anyway, current rates are sitting at a 5.33%.


Again, they kept them flat just yesterday. Been flat since August. They've kept them flat since August. And through now we're in December. They won't have another meeting until January. So definitely we'll keep it flat then. So what I'm expecting is for interest rates next year is I think there'll be a decrease. Now, I don't think it's going to happen for a while, though, because again, it takes a while.


They pull these levers with interest rates and it takes a while for sort of that lump to get through the snake, so to speak, before the impact, the desired impact takes effect. Right. It doesn't happen instantly. So what I'm anticipating is I think interest rates will drop by about 100 basis points, so 1% throughout the year. But I don't think that they're going to start to make those decreases until probably the May or June meetings.


So almost the middle of the year before they start to make those decreases. Now that means based on what I'm thinking is those decreases, you'll see a 1% drop in that rate. So it's going to get down to low 4% ish by the end of the year. So between May, let's say May, June and December, like their last meeting is in the middle of December, they're going to be dropping about 100 basis points during that time is what I'm projecting. So keep that in mind. Should see that towards the end of the year.


Now, what's the impact going to have on unemployment rates? Unemployment rate now is sitting at 3.7% throughout 2023. It's been sitting in the 3.5 to 3.8%. Really been pretty steady throughout the year. Still not where they want it, though, because really what they want is they want to see things. I'm sorry. Unemployment is not exactly where they want. I think they want to have it down a little bit more.


I think they're looking for it to slide down off that three seven, get down into the three five, three fours, something like that. And again, that'll be a trigger for them to begin to decrease those rates. I'm sorry. Gosh, misspoke. I'm sorry. I'm expecting this year for 2024, I should say a modest increase throughout the year on an unemployment rate. I think the peak is going to actually be in fourth quarter. And again, a big part of that is going to be the interest rate movement that I mentioned before.


So again, sorry, I misspoke. Now what I've mentioned this before on the show, during last year's show as well. Another thing that I think is more a better picture of the unemployment status in the United States, and that's called the labor participation rate. And again, just a little bit of framework around that. That is people that are 16 years and older that are obviously in the workforce, that are non institutionalized. That sounds big. Word sounds a little crazy.


Essentially what it means is it takes everyone who's 16 plus and able bodied, that is not in prison, is not in a nursing home, is not in a mental health facility, and is not in the military. So it takes all those out. Now, as you can imagine, United States, that number ends up being fairly significant. That is something that I look at as a little bit better of an indicator now that labor participation rate has slid over the last 20 years.


It's down, it's been holding steady, reasonably steady in about 62% ish. So it means essentially 6.2 out of ten people that are able bodied and 16 plus years old that are non institutionalized, et cetera, are actually either employed or seeking employment. Now, again, that number has come down over the years, but it's held totally steady. Now, why is that number move? Well, a big reason why it's decreased or a couple of big factors on why it's decreased.


You've got a lot of people that have been retiring, so they're obviously no longer seeking employment. As the population ages, you have people that are going into nursing homes, maybe mental health facilities, things like that. So that number is going to come down based on those things, retirement, the other thing, that's kind of an OD thing. But college people that are in college that maybe are not working or seeking employment, the college participation rates. So the number of people going to college had been rising steadily, and then through 2011, 2011 to 21, it came down post pandemic, it's actually gone up now to that number is increased.


It's in the 22% range now. So that's another thing. As people are going to college more and not seeking full time employment, that's going to drive down that labor participation rate. Now, presumably, once they get to college, they're going to be seeking a job, and that'll kind of balance things out a little bit. So that's interest rates, that's unemployment rates. I want to get into the next segment. And again, we'll start off by talking about inflation, lots to say about inflation, as I'm sure everyone's pretty interested in that. Again, supply chain, stock market. And then most importantly, talking about some opportunities to make sure you seek during all that. So again, come back after the break, get the Mr. Biz tip of the week, and we'll dive into inflation in 2024.


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All right, welcome back to the show. It is time for Mr. Biz Tip of the week. This is a tip of the year. Okay. Anyone who's watched the show over the last seven years knows I close out every show with this, and I close out the year. The last tip of the year is always this one, and that is cash flow is king again. I know I talk about it, I harp on it, but it is extremely important. It's always important, but especially now when we're facing the economic challenges that we're facing, and even some of the things we're talking about that are going to be facing us in 2024, super important.


I love this statistic, and it's something to keep in mind. 82% of all business failures are due to cash flow challenges. And so, as I always say, I like to flip that thing on its head and say, man, if you get the cash flow right, you don't have to worry about 18% of other reasons why your business might fail. Critically important, there's almost always ways you can improve it. Little tweaks you can make here and there.


Don't hesitate to reach out if you need help with that. I've actually written a book, how to be a cash flow pro about it, with, like, I don't know, 50 plus tips on how to improve your cash flow. Super important. That is the Mr. Biz tip of the week and year. All right, so next up, next up, what to expect in 2024 in regards to inflation. So, again, just a little bit of framework, a little context around it.


You hear this number bandied around all the time. They talk about it when it comes out. That number comes out each month. So what is inflation? I mean, a lot of people just say price is increasing, right? Fair enough. That is what it is in simple terms. But really, if you want to know how they calculate it. So it's literally based on a weighted average cost of, they call it a basket of goods, and they compare that to a prior period. So it could be November of 23 versus November of 2022. What's the year over year change in the cost of this basket of goods? Now, you might say, well, how do they come up with that?


There are a whole slew of things, but the normal things you would think of go into that basket of goods on how they calculate it. And just so you don't think they're game in the system, they do survey every single quarter and adjust that basket of goods on how they're measuring it. So they survey, I think it's like 24,000, kind of an OD number. But I think they survey 24,000 Americans every quarter in all demographics, all geographies, et cetera, on what are you buying?


What is in your shopping cart, or a buggy, as we call it in Ohio, what's in that shopping cart that you're buying right now, this quarter. And so that thing changes all the time. And the percentages that make up that. So the energy costs, so your fuel costs for your car, et cetera, your groceries, what are you buying at the grocery store? It gets pretty detailed. So again, it's got a whole slew of things.


You'll see that a lot of times they'll say basket of goods, including, and they'll list like four or five different things, primary things, but really the subcategories underneath there are big, so I tell you all that to say. They actually do go into this in pretty big detail and try to have really a good measurement of what real Americans, it's not just some generic thing that economists are sitting in a room saying, well, let's pull these things out of our ears and figure that out.


So that's how you measure it. What has happened, they really want to keep it around 2% is what they want. Right now it's sitting at 3.1%. So it's still a little bit higher than they want. And as I mentioned before, when inflation is too high, they increase rates. So you might say, if it's at 3.1 and they want to get it down to about two, why are they not continuing to raise rates? Well, they've been holding steady. It's been coming down slowly.


So I think they're again waiting for that, turning that battleship, waiting for some of that to come through, to see it continue to slide down and get down into the twos, which I think will actually happen. As we get into first quarter of 2024, we'll start to see that number slide down. They're not going to wait till it gets all the way down to 2% before they start to drop rates again. I don't think, I think it'll get down to maybe the mid two s, two and a half percent or so before they begin to drop those rates again, as I had mentioned before dropping those rates beginning maybe in the May to June time frame.


So that's a little perspective on that. I think the reason why you're going to see the change you will is cumulative impact of inflation. What we've had, plus the increased interest rates is going to see, you're going to see it decrease inflation decrease during the first half of 24 and then again, with the rates changing, rates are going to drop. Second half inflation is going to start to inch up again. I don't think it's going to go significant.


Fingers crossed. But that's where I think we'll go with that. Now, a couple of considerations that are sort of related that I wanted to mention that I guess sort of related to inflation, labor, et cetera. So in 2024, keep this in mind and look this up if you're not aware of this in your state. So I was going to list them all, but there's literally 20 plus states that are slated to have an increase in the minimum wage, and most of those are fairly significant.


So depending on what you're paying people, if you're paying people at a minimum wage in your business, make sure you determine in your state, if you're one of the states impacted by the increase in the minimum wage, presumably you would know about that already. You should. It was already discussed, talked about. It's going to happen. Not if it's already slated to happen. Like I said, it's 20 plus states. So check that out for sure.


Another thing to consider, this is not passed yet, but there has been a rule proposed that is getting pretty good support and decent chance it's going to happen at some point. And it doesn't take a long time. Right. If this thing gets passed, it can be implemented pretty quickly. And that is, and maybe this has to impact your business, but keep this in mind. The proposed rule is going to allow about 3.6 million people would be affected by this.


They're salaried employees, exempt employees. It would allow them to get overtime. Now, what it would change is so it would add 3.6 million people into that bucket to be allowed, because right now those people that are exempt, salaried, et cetera, they are allowed to get overtime. If, right now, if they make under 35,000, I think it's 35,000, like $568 annually. Probably not a lot of people put in that bucket. What they're going to do, though, is they're proposing to do is to increase that threshold.


So now it would be around $55,000. So if you have someone who's salaried and makes $55,000 or less, they're going to be allowed to get overtime if this passes. And again, I think there's a decent chance it passes at some point during the year. Keep that in mind again, as you're preparing your budgets, as you're thinking about things for next year, think about if you've got some folks on your team that fit into that bucket.


You might even think about if you've got someone who's close, should you just bump them up? Should you give them a raise to get them, if they're making, I don't know, 50, 52, 53 or something like that, and they will be subject to this threshold. It might behoove you to go ahead and bump them up, put, you know, get them over that 55,000 threshold. They wouldn't be subject to this. And I don't mean to screw people out of overtime. I don't mean that at all. But I mean, as a business decision, if those folks are working a lot of hours for you, you need to kind of look back and how much overtime have those folks worked?


And maybe with the overtime they're making over that already, so it really wouldn't even have an impact on you. But you can change their salary so they don't have to earn the overtime to get that. And that's the thing. That would be kind of a win win, right? You increase their base salary above that 55, maybe with overtime they're making 56, you bump them to 56, no impact on your financials, helps them out, gets them a more steady income.


Kind of a win win there. But keep that in mind. Those are two different considerations. The increase in minimum wage in 20 plus states and then that other piece that I just mentioned, as far as other people salaried people being eligible for overtime. So that's inflation. I said a lot of stuff to talk about on that during this last segment. We're almost up against break here, but I want to talk again. These will be a little bit briefer. Obviously, we're going to cover all three in the last one, but supply chain, stock market and then opportunities to seize in 2024.


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Check out all three of Mr. Business best-selling books at mrbizbooks.com. Now, once again, here's Mr. Biz.


All right.


Welcome back to show.


Look, man, I had to put the rally cap on, put the 2024 rally cap on. So again, I want to get through these last few things. Hopefully this has been helpful so far. We got a lot of more things to talk about here during this final segment here. But I really want to make sure that you guys understand I talked about in the last segment, but that minimum wage piece and that overtime piece, you got to make sure, especially in your budgets, you're not getting blindsided by those things. And again, hopefully you're aware of both of those and if they're going to impact you. But definitely consider those. All right, supply chain now this is a much bigger topic.


The prior two years I've done this year end show, obviously, so we've made a lot of progress with that. It's been fairly stable, and I expect it to stay that way. I don't expect to see a lot of improvements over where we're at. So the supply chain you're dealing with right now, again, there'll be some differences depending on your industry, where you're getting your goods from and shipped from. There could be country specific export import impacts. But I wanted to give something sort of a little bit more general.


I don't see anything, I didn't see anything that I would regard as a big risk in any one country. So if there was, for example, in China or Taiwan or whatever have you in India, I would mention that I don't see any huge red flags in any one of those countries in regards to supply chain disruptions. I anticipate in 2024. However, not so fast, my friend. As Lee Corso says on college game day, I do think there are some risks that you need to consider.


These aren't big things that you probably haven't thought about, but I want to mention them just to make sure they stay at the top of your thoughts. Labor shortages again, anyone who's listening to this, who's a business owner, I'm sure you've dealt with some labor shortages, some labor challenges, resource challenges. Even if you don't have a shortage, you might have some difficulty hiring quality good resources.


Some of the supply chain vendors are having the same issues. And here's a couple of things that could impact that even more, just to give you another kind of a couple nuggets to think about. Hopefully it doesn't happen, but a Covid resurgence, I know there's been a lot of things talked about in China, about, I just heard something very recently about something that might be another strain of COVID Maybe it's not. Maybe it's something new that they're trying to contain.


Again, it's difficult to tell with the media of what you're getting from the media coming out of China, I should say of if it's a real thing, if it's a threat. This is how the whole thing with COVID started, though. If you recall back then, oh, my gosh, we got this thing going. You're like, ah, not a big deal. And then it became a big deal. So keep an eye on that. Port congestion. So with labor shortages comes port congestion, and we faced this, I guess, probably for a while there, where a lot of the port workers just said, I'm not working anymore, screw this, and essentially went on strike. That's another thing. There could be strikes again. I can't foresee those happening, but it could easily happen. I mean, you could foresee a situation where that now, how do you prepare for that? Who knows? Because we don't know where that's going to come from, what might be impacted. But these are just some things to keep in mind.


The one thing you can do, and again, I'm sure, based on the supply chain issues that we've all faced over the last three years or so, especially, is, and you've already done this, I'm sure, but really diversify as best you can. Where you're getting your goods from, your raw materials, whatever you're ordering, where you're getting those things from, the countries, the regions in the world, how you're getting them, where they're coming into the US. And again, I'm sure, hopefully you've done that already and diversified that a bit and considered that and have a backup if something happens, you've only got one vendor that's supplying a big piece of what you need, and a significant event happens, a strike or whatever it might be happens in that country, and you're left dead in the water, you definitely got to make sure you have some backups. And again, hopefully everyone's kind of gone through the motions on those things with the challenges we had over the last few years.


Okay, moving on. Stock market, this is a big question. I'm not a stockbroker I'm not all that stuff. I worked in that a bit a long time ago in my career. But I do dabble. I do think about it because it does impact business. And so I need to keep up on that a bit. At least 23 has been a good year for the stock market, measuring by the S and P 500 at this point in the year. We still got a couple, at time of this recording, we still got a couple of weeks left, but it's up about 20 plus percent at this point, year over year.


So that's been good. Some things to consider as we go into 2024 and as we go through 2024, obviously, geopolitical risks, Ukraine war, Middle east, the unstableness in the Middle east, anything like that. We need to consider the geopolitical risks and the impact that's going to have. How the heck do you project those, who knows? On the flip side, those things, if we can get some resolution on those, that's going to help as well.


The other big thing, the United States consider election year, presidential election year. Now the good part, I looked this up. During presidential election years, the average return on the stock market has been a positive seven and a half percent. It's actually just a hair under the normal historical return on the S and P 500. However, good news, right? Not like a huge disruption. Keep an eye on that, though, because as the presidential race heats up and we start to see who might be winning back seats in the House or losing seats in the House and Senate, et cetera, obviously in the White House as well, could have an impact on that. So keep an eye on that. So what do I expect this year?


I expect that the stock market is going to be mostly flat, maybe up slightly during the first half of the year, second half of the year, as interest rates come down historically, that means that the stock market goes up. So again, I'm projecting that rates are going to start to come down. So I think the second half you're going to see an increase. I think on a full year basis we should see about a plus 9% to 10% increase in the stock market year over year.


So that's positive. So keep that in mind. So that's what I think about the stock market and what I'm looking for things to happen in that space. Now, the last part, just got a couple of minutes left here, but I want to talk about some opportunities. What can you do? Right. So I've talked about some things to do based on the things we've already talked about, interest rates, unemployment rates, inflation, supply chain, stock market.


What are some other things you can do? First of all, duh, you know, I'm going to say it. Focus on your numbers, especially my three pillars of financial success, cash flow. Take another look at that. What can you do, what tweaks can you make to maybe improve that? Make sure you're creating a budget for 2024 and you're measuring against it every single month so you can see exactly what's going on, what's working, what's not working.


Adjust bob and weave. Do what you need to do to keep on pace and doing what you want. And then pricing. If you haven't looked at your pricing for a while, critically important, right? We're talking about inflation, all the stuff. You haven't adjusted your pricing in a while. It's a good idea to take a look at that at least quarterly. Look at your pricing in this volatile time, economic time. Another thing, if you haven't done this already, you're probably behind.


But I'm going to say it anyway. You got to embrace new technology. This little thing called, I don't know, you might have heard of it, artificial intelligence, AI. How can you incorporate that into your business? It's not if it's when it's going to impact almost all industries. You got to get out in front of this or maybe run alongside it because it's already moving pretty fast down the tracks. Think of ways. Go out, find someone who's an expert on it, pick their brain. What are some ways you can implement AI into your business to make it more efficient?


Critically important. And the last thing I'll mention that's an opportunity, especially right now, is you got to prioritize the customer experience for your customers. Make it easy to do business with you, make it easy for them to pay you. Don't make them jump through three hoops. Click on here and then fill in this information. Make it as easy as possible for people to do business with you. Make the customer experience, that's that little thing that can help when someone's ticked off at one of your competitors and are looking for something new.


That improved customer experience is going to get you and grow that market share, get you those new customers, et cetera. So those are three things that I think are very important in this coming year, in 2024. We are out of time. That is all. Hope you guys enjoyed it. I know a lot of you guys will be calling me out throughout the year if my predictions are off. We'll see. But anyway, as always, guys, thanks for a great year. Thanks for watching thanks for listening to the show and all the support you give us.


Have a great rest of your week. Have a great 2024. And as always, don't forget, cash flow is king.


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