How businesses can thrive amid economic optimism and persistent concerns

By most counts, this should be a period of great optimism for businesses.

The economy continues on its growth track following a 3.4% gain in GDP in the fourth quarter of last year, according to the U.S. Bureau of Economic Analysis. Consumers continue to spend, wage growth is moderating and inflation is finally losing some steam. COVID is now well behind us, supply chain dynamics have improved and innovation is surging through new technologies. 

Yet, a heightened sense of uncertainty persists among management teams, particularly among small and mid-market companies. In fact, optimism among small-business owners hit its lowest level since 2012 in March, according to the National Federation of Independent Business (NFIB).

Moreover, the NFIB's index dropped to 88.5, marking the 27th consecutive month below the 50-year average of 98.

What gives? Why are we seeing such a low level of optimism given overall improving economic conditions?

Our conversations with our clients tell us the answer lies in uncertainty about the future and how to prepare for it.

The direction of our economy, as well as a broad range of factors spanning technology investment, changes in the workforce, the growing costs of employee benefits and the evolving manner of how we work, are all causing apprehension among management teams.

Consider that consumer sentiment has remained relatively healthy regarding the current economy, yet concerns are growing about the longer-term outlook. According to the most recent survey from The Conference Board Consumer Confidence Index, consumers’ outlook for future business conditions, labor market conditions and income expectations all deteriorated at the close of the first quarter. Sound familiar? 

The message of all this seems fairly clear: Things are largely going well — but for how long?

Even leadership teams at successful enterprises that have healthy businesses, loyal customers and strong market positions aren’t immune from uncertainty. Operating a business has become not only more expensive but more complex. It’s harder to pinpoint where your organization may be in its life cycle because so much is changing in the broader environment.

So, the concept of optimization, where all the elements are working together, is somewhat in flux for many organizations. There’s some cloudiness and even fatigue in terms of what path to follow and where to invest to help ensure longer-term success. Gaining clarity starts with taking a step back and assessing your organization with fresh eyes from a holistic standpoint. This process begins with asking the following questions:

• Does my organization have a focused vision and plan?
• Do we have the right leadership team to inspire and motivate?
• Do we have an energized, engaged culture?
• Does our brand messaging resonate and sell?
• Have we achieved sustainable and scalable growth?
• Do we have the financial flexibility to be resilient in hard times and grow?
• Are our people, processes and technology aligned?

These questions center on fundamental aspects of your business that may weaken over time, even when times are good and things are going right.

There may be less urgency to undertake this kind of assessment right now, but doing so will increase the likelihood of identifying those vulnerable areas that need to be addressed. Then you can focus on formulating the right plans to tackle the burgeoning issues before it’s too late.

This is all about refocusing on best business practices and maintaining a disciplined approach to management, regardless of economic cycle. Periods of uncertainty are also good times to assess what’s working and what isn’t, as you reevaluate your organization’s path to achieving optimization.

This process will only foster greater clarity in decision-making and help ensure you are better equipped to weather actual storms as they arise.

In an uncertain environment, the task of deciphering whether or not your organization is operating at an optimal level can be difficult. Gaining clarity starts with taking a step back and assessing your organization with fresh eyes from a holistic standpoint.

How Wipfli can help

Wipfli can help you start your journey to operational excellence by looking at your current state and helping you develop a strategy to reach your desired future state. See how we can get you there with our Prime Growth System.