Postprandial Somnolence, 2023, The 4th C, WFH
Post what?
That’s what happens when you eat poultry and bread – protein and carbs. The protein and carbs combine to produce a sleeping effect – in essence, it is much easier to fall asleep in the recliner. The fact that the football game is going on is only coincidental. And 3 days later I’m still in a postprandial somnolence. That can happen anyway at the end of the year, particularly by employees looking for a reason to not really work in December, generally when the owner isn’t in.
The Economy is Alive and Well, but…
Well, Black Friday online spending was up 2.9% over last year. So are credit card balances.
That means that folks have burned through their cash. Or don’t have a job. Or have used all of their points on post-covid travel.
And small businesses are reporting to me that they are certainly seeing a slowdown of orders.
I think it is this activity that is driving somewhat of an economic consensus that the Fed will be easing off the increases, which means raising rates by 0.5% instead of 0.75%. That will take the prime lending rate to at least 7.5%.
So what should you do? Adjust your “Playbook” - that’s what your business plan is called.
The 2023 Playbook
Yep, in about 30 days, it’s 2023. What will be different?
Costs will be higher, particularly wages.
I had another conversation with a small business owner (38 employees) that runs a machine shop, and has been doing so very successfully for many years. He mentioned the difficulty in dealing with “The Optics”. What did he mean by that?
For him, it was his workers driving past Taco Bell and seeing a sign that says $21/hour for the night shift.
To counter this, he has raised his lower paid workers by $2/hour twice in the last year. They are at $19/hour.
But not his higher paid machinists. He knows this is coming though; it’s just a matter of catching up.
He had an interesting term for it: The Bottom-Up Bubble.
It’s a bubble of wages starting from the bottom of the wage chain and working itself up the wages ladder.
The bubble doesn’t really pop, it just grows, swallowing wages in its path and forcing employees to leave or the owner raising wages for the folks up the ladder.
And the cost of wages keeps going up…
Back to the Playbook. If you are in California…
California is a different state. It’s expensive, but everything is included, as I often say.
As a business owner, however, you have to work harder than businesses in other states.
You need to be able to adjust to what the California legislature (mostly) and the county and city officials (somewhat) would like your business to do.
If you are a franchisee of a fast-food chain that has more than 100 restaurants, you need to plan on paying your employees $22/hour minimum, starting sometime in 2023. It may not happen, but you need to plan for it.
Dovetailing on that, if you are just a single restaurant owner, how will you prevent your workers from jumping ship from your small burger joint to Burger King so they can make another $5/hour?
Will you be able to compete with that? Start planning.
If you are a logistics company, you can no longer depend on independent truckers to haul for you; you must plan on hiring them on as employees since the State has put significant constraints on folks that just want to work for themselves. Plan for it.
Are you in an industry that may require equipment upgrades to stay within new parameters of State law? Have you planned for those purchases?
The City of Montclair just ordered a new fire truck for $850,000 because an existing 2011 truck no longer meets emission requirements.
Just talking, but if that old truck is going out to a fire, I’m guessing the emissions from that truck are not even a rounding error on the smoke emissions it will be putting out.
Probably the best thing you can do is to join your industry association. They will keep you abreast of what is going on, not just in California, but other areas as well.
They will lobby state and local leaders on your behalf and will be able to give you a heads up on upcoming legislation that could affect you.
Put that in your Playbook. And make sure your projections are in place for 2023 before 2022 ends.
Bank Lending: ‘C’ #4: Capital
What is this ‘capital’ you talk about? Simply enough, it is the amount of capital – money - you are willing to put into the project being financed.
Also known as “Skin in the Game”.
You may recall 2005, 2006, 2007 as the go-go-go mortgage years. Well, it’s pretty easy to be go-go-go when the borrower does not have to put any money down. Many borrowers had “No Skin in the Game.” So when it came time to pay the loan back, and they couldn’t refinance the house, the borrower just walked; they literally had nothing to lose since they did not put in any of their own capital.
That is why credit officers will always look for how much the borrower is putting into the deal.
So why do some banks finance 100% of the equipment purchase price?
The borrower has enough other assets – collateral – to offset the lack of a down payment on the equipment.
And significant capacity to pay it back.
It’s worth noting that the decision to approve a credit application is based not just on one or two ‘C’s. All five play a key role.
Under the category of “I’m so naïve”:
Work From Home (WFH) has lost much of its charm with bosses. That part I knew.
What I did not know is how crafty job interviewers are via online video interviews.
Recruiters have seen job seekers hide interview coaches out of the camera angle.
Some have even lip synced the answers the interview coach gave, passing off the un-synced speaking as buffering issues.
And that’s before they get the job.
85% of leaders in one survey complain about the difficulty of measuring productivity in WFH situations.
Over 1/3 feel that there is more productivity in the office because of the collaboration factor. And the complaints about the microwaved fish leftovers.
One owner of a 22 person company stated that he holds 15-minute meetings, a combination of in person and zoom, twice daily. Once at 9 a.m. and the other at 4:45 p.m.
He feels it builds comradery and makes it easer to notice who is showing up late or leaving early.
Wow, I’m not sure I like that.
I would start the morning one at 8:00 a.m. when they should already be working. But then again, I’m a Boomer.
The World Cup
This is a soccer (European football) tournament that happens every four years at various locations, playing for a very ugly trophy that is a replica of the original.
The original trophy was stolen in 1983 and never recovered.
The venues are chosen by an international committee (FIFA) of cash hungry bureaucrats. They review proposals by host countries on not only how much the applicants will pay the members of the committee to vote for their proposal but in what currency or commodity.
The recipient of the cash (committee head) is Sepp Blatter, which sounds like a medical condition. “I’m sorry, Mrs. Jones, you have a condition known as a sepp blatter.”
Regardless, my reporter on the ground in Doha (the capital of Qatar) tells me that it mostly seems to have come together and really, all is good. Budweiser would probably disagree, but you can google that topic.
I mention all of this to ask that you cheer for the United States Men’s Soccer Team as they play Iran tomorrow. To advance to the round of 32, they must win. Not tie, win.
They play at 11:00 a.m. Pacific, 2 p.m. Eastern. While they are favored, soccer is a funny game – Japan beat Germany and Saudi Arabia beat Argentina this past week.
USA!! USA!! USA!! USA!!
26 shopping days until Christmas.
