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Whether from the rising interest rates or the prices in the grocery and at the gas pump, we have all felt the squeeze of the economy. While these changes in the economic landscape present challenges for businesses of any size, they also offer opportunities. In this article, we’re looking into the future and discussing what businesses should plan for 2024.

Inflation

Inflation is the rate at which prices for goods and services rise. For the last few years, the cost of living and doing business has gotten more and more expensive. Inflation reached a 40-year high in 2022 due to the strain on the supply chain from the lingering effects of COVID-19 and the war in Ukraine. Then in 2023, inflation continued to be elevated. In response, the Federal Reserve has been increasing interest rates–more on that further down.

Our Prediction on Inflation For 2024

Inflation is expected to continue to even out in 2024, but it is still expected to be above the Federal Reserve’s target of 2%.

Interest

The Federal Reserve’s answer to slowing down inflation is to raise interest rates. Why? Because it tends to slow down spending since the cost of a loan for major purchases goes up. This slowdown in spending causes demand to go down, which should slow down inflation.

In response to surging inflation, the Federal Reserve began raising interest rates in March 2022. This year, the central bank continued its tightening policy with interest rate hikes. However, in September 2023, it did not raise interest rates. The Fed said it would hold the federal funds rate in a range of 5.25% to 5.5%.

Our Prediction on Interest Rates For 2024

Since interest rate hikes are a response to rising inflation, we expect the rate at which interest rates increase to slow down as inflation is expected to even out in 2024.

What Business Can Do in 2024

In any economic landscape, businesses should proactively plan, but this is especially true in the current economic landscape. Here are some key considerations for business planning in 2024:

Look At Your Cash Flow

Amid rising costs combined with questions swirling about a current or potential recession, understanding your cash flow is key, as the business will need to maintain healthy cash reserves and manage debt effectively. Analyze your business’s expenses and identify areas where expenses can be reduced to improve profitability and cash flow. This may mean renegotiating contracts with suppliers, adopting leaner operational practices, and exploring alternative sourcing strategies.

Evaluate Your Pricing

You aren’t the only one looking at their expenses, so you also need to evaluate your pricing against market conditions. Right now, with everyone tightening their belts, that means balancing profit margins with affordability. This may mean implementing targeted price increases, introducing value-added services, or exploring new pricing models.

Prioritize Employee Retention & Development

One of the biggest things affecting businesses today continues to be recruiting. Your business’s ability to deliver goods and services depends on your team. To maintain a skilled and productive workforce, prioritize competitive compensation and benefits, foster a positive work environment, and invest in employee training and development programs.

Look to Technology

Technology is moving faster than ever and has the power to enhance efficiency, reach new markets, and improve customer experiences. Take a look at the digital technologies your business currently has and what is in the marketplace to see where technology can be improved to improve your business’s outcomes.

The Takeaway

The current economic climate presents both challenges and opportunities for businesses, but with some proactive business planning, your business can position itself for success in 2024 and beyond. The key lies in being able to plan with flexibility in mind–so that your business is able to both make informed decisions and adapt to the evolving economic landscape.

Have questions about getting started? We’re ready to help. Contact us to meet with our team of business advisory and business tax planning experts.