How’s Your Economy
Written by Corey Chambas, President & CEO, First Business Financial Services, Inc.
First Business Financial Services, Inc. Board Member
First Business Bank Board Member
It’s not about the economy; it’s about your economy. By your economy, I mean your company’s economic situation (as opposed to your personal economic situation which is a whole other issue). When people talk about “the economy” they are usually referring to the national economy. It’s what you read about in newspapers and online. Overall, that economy is pretty bad. The statistics referenced are averages, and as we all know, averages can be misleading. It makes me think of the old analogy: if you have one hand on the stove and the other in a bucket of ice, on average you’re feeling just right. Similarly, you might have an economy that is flat, with half the economy growing at 10% and half shrinking at 10%. Averages can be misleading.
Why does it matter? Depending upon your business and its economy, you may be looking at a rough or robust 2011. In my position I get to see how many companies are doing financially. The details are obviously confidential, but what they reveal is very interesting. As you might expect, we have some clients who are struggling and even a few that have gone out of business. But we also have clients who had a record 2009 and are doing it again in 2010.
Most businesses hunkered down over the past couple of years. They controlled expenses and limited budgets, which was probably appropriate at the time. But if your business segment is growing in 2011, operating with a reduced sales staff and limited marketing budget may cause you to lose out on opportunities. On the other hand, if you’re in an industry and geographic area that may be no better in 2011 (commercial construction and home building might be examples) and you have not yet adjusted expenses enough to be in the black, you may need to make further changes. These are critical decisions, and they need to be made after considering your company’s unique economy.
The specificity of local economies led our company to start a local economic survey. We now do that survey annually in Dane County, Milwaukee and Waukesha Counties, and Northeast Wisconsin. The data is from the major markets we serve and is useful to us (and our local clients) as we look to do our budgeting and planning for the upcoming year. I look closely at this data each year. I don’t just look at the averages of how our local economy is doing – even though that’s valuable information as it may be very different from the national economy – I also look at the variance in actual and expected performance numbers and drill down to the distinct industry segments.
I encourage you to look for data for your markets and for the industries to which you sell. Much of that information can be gleaned from industry publications and websites, local economic data, or even self generated reports from your sales or business development staff. Don’t get too hung up the averages for the national economy. Make your best assessment of your company’s economy and plan accordingly for 2011.