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It’s On Everybody’s Mind

By September 30, 2022No Comments

The title might be off a bit as it’s not one thing but multiple connected things on most of our minds. Those things are:

  • Gas prices
  • Food prices
  • Inflation in general
  • Recession talk
  • World events

There’s definitely caution in the air as I’ve heard from business owners, buyers, real estate professionals, mortgage lenders, and others.

At the end of May President Biden wrote an opinion piece in the Wall Street Journal titled, “My Plan for Fighting Inflation.” Two days later, in his weekly WSJ column, Karl Rove said the President doesn’t have a plan other than to blame everybody else.

The Treasury Secretary said the Treasury miscalculated the potential of inflation when it was starting to creep up. I’m not sure any government officials gave one iota of thought to inflation when they flooded the country with money in 2021. (When it comes to economic theory take what I say with a grain of salt. My undergrad and grad school degrees are in economics, which makes me just slightly more knowledgeable than those with PhD’s and a lot dumber on it than the population in general.)

There are also reports that grocery stores are finding people moving from high priced items to lower priced and store brands versus national brands. Major chains said they’re putting pressure on food manufacturers to keep prices in line. And, of course, numerous reports about how package sizes are shrinking so while the price looks the same it really isn’t.

So what does that mean in our daily world? As one client said, “Everybody’s looking for a deal,” i.e., a lower price. But mainly it’s uncertainty. There are articles regularly about how management has to manage all of this, without knowing what the heck is happening. CFO Selections just sent out a newsletter titled, “How does Uncertainty affect a CFO’s Role?”

Speaking of CFOs, now is not the time to have a weak financial/accounting department. More than ever, cash is king and that means collecting it, managing it, watching margins, and updating budgets regularly. I’ve used this example before: a past client’s company had the owner, the owner’s wife, and the GM all giving different instructions to the accounting department, and none of them really knew anything about accounting. So it was no surprise when the owner said he couldn’t figure out why there’s no money in the bank when the P&L shows the company is good and profitable.

The flip side of the previous example are the companies where it’s “management by checkbook.” There’s always money in the bank account so things must be going well. Both examples are what can hurt, postpone, or kill buy-sell deals.

One client likes to talk about:

  • Supply chain
  • Recession
  • Inflation
  • World War III

Understood, but why reinforce it? So, what’s the conclusion?

There are so many moving parts on all of this it will take time. Too much money created excess demand, lockdowns delayed manufacturing, no politician wants to seriously deal with it, and why should they when they can blame the other party. For those of us in the midst of it, uncertainty often creates inaction until there’s some clarity. And then it’s full speed ahead.