ARW Techspec: What's the Forecast?
I am not an economist, but I have been a business owner for over 20 years. This experience has led me to some insight on the economy and economic forecasts. As we all navigate through this year, the question remains: When will we see a turnaround?
I am not an economist, but I have been a business owner for over 20 years. This experience has led me to some insight on the economy and economic forecasts. As we all navigate through this year, the question remains: When will we see a turnaround?
In construction the turnaround will only occur when two fundamental actions transpire. Number one, the banks and other lending institutions need to start providing the credit that we have provided to them (through our tax money) to the companies that meet acceptable standards. At this time credit is costly and extremely scarce. In today’s business climate even the best-managed companies depend on credit to bridge the gap between targeted project progress and the actual payment of receivables. Lately, I have been hearing horror stories from well-established company owners who - even though their business is currently profitable - fear the loss of line of credit that is essential to payroll and other overhead costs.
The second thing that needs to happen is that companies need to start allocating money for capital projects. Capital expenditures are obviously hindered by lack of sufficient credit. The companies also need faith that they can return to profitability without more cuts.
Both of these factors come full circle and are largely dependent on consumer confidence. We need the consumers to start purchasing the goods and services that allow these companies to provide employment. Cutbacks, layoffs and closures will continue unless the companies can generate the sales volume required to keep the doors open. A business can only reduce overhead to a limit without increasing sales. This is the fundamental business adage: you cannot cut to profitability. Of course cutbacks, layoffs and closures diminish consumer confidence by reducing consumers’ ability to purchase goods and services.
This year more than ever we are finding out that businesses are not machines - they are collection of people who are doing their best to support their families. If a business fails it is our friends, families and neighbors that ultimately suffer.
Let’s hope that the downturn is short-lived and that we can return to some semblance of capitalism. After all, it has worked around here for more than 230 years.
I am not an economist, but I have been a business owner for over 20 years. This experience has led me to some insight on the economy and economic forecasts. As we all navigate through this year, the question remains: When will we see a turnaround?
In construction the turnaround will only occur when two fundamental actions transpire. Number one, the banks and other lending institutions need to start providing the credit that we have provided to them (through our tax money) to the companies that meet acceptable standards. At this time credit is costly and extremely scarce. In today’s business climate even the best-managed companies depend on credit to bridge the gap between targeted project progress and the actual payment of receivables. Lately, I have been hearing horror stories from well-established company owners who - even though their business is currently profitable - fear the loss of line of credit that is essential to payroll and other overhead costs.
The second thing that needs to happen is that companies need to start allocating money for capital projects. Capital expenditures are obviously hindered by lack of sufficient credit. The companies also need faith that they can return to profitability without more cuts.
Both of these factors come full circle and are largely dependent on consumer confidence. We need the consumers to start purchasing the goods and services that allow these companies to provide employment. Cutbacks, layoffs and closures will continue unless the companies can generate the sales volume required to keep the doors open. A business can only reduce overhead to a limit without increasing sales. This is the fundamental business adage: you cannot cut to profitability. Of course cutbacks, layoffs and closures diminish consumer confidence by reducing consumers’ ability to purchase goods and services.
This year more than ever we are finding out that businesses are not machines - they are collection of people who are doing their best to support their families. If a business fails it is our friends, families and neighbors that ultimately suffer.
Let’s hope that the downturn is short-lived and that we can return to some semblance of capitalism. After all, it has worked around here for more than 230 years.
