LGT's Profit Sense

Already with more than one quarter of 2019 in the books, CEOs of small- to medium-size business (SMBs) remain cautious but optimistic about the remaining portion of the year. In a recent polling of SMB CEOs, executed by Vistage Research, CEOs said that they are are optimistic about the potential for growth in 2019 but are uncertain about their ability to realize that potential. The majority of SMB CEOs are expecting an increase in revenues and profitability, but less than 15% of them believe that the economy will improve in 2019. A critical factor here is that the brief rush of economic boom from the Tax Cuts and Jobs Act (TCJA) was negated by the unpredictable tariff price increases. Most SMB CEOs felt no impact from the TCJA, and a little less than half have been negatively impacted by tariffs. Wholesale trade, manufacturing and distribution, and construction, key underpinning sectors of the economy, report having some of the highest negative impacts of tariffs. This economic uncertainty presents a dilemma for CEOs on how to maintain growth while being cautious of a potential economic slowdown.

Projection: Talent Management

Growth is not possible if you do not have the workforce to support it; in fact, having unfilled positions can cause serious problems for a smaller business.  Because of this, 65% of CEOs agree that they will need to increase their firm’s total number of employees. SMB CEOs anticipate needing to have better benefits and higher wages to attract new hires.  At the same time, 71% of CEOs believe that the best way of retaining their current staff is to invest in employee development.

Projection: Customer Engagement

Even with the impact that tariffs have on the economy, 70% of CEOs anticipate that sales will increase over the next 12 months. A growth strategy will require attracting new clients and increasing sales to your current clients. An effective CEO will focus on expansion, talent, and marketing. Expansion means looking into new products or services, expanding into new markets, or considering an acquisition. Make sure when expanding workforce that salespeople and strong leaders are a priority so that they can close on the new clients and promote the existing client base. Marketing is the face of the business to the existing and potential client base; making sure the marketing department is sufficiently staffed and capable can be the difference in a 2% increase and a 15% increase in sales.

Projection: Financial Management

As the economy softens, cash flow will become an important part of the growth plan for any SMB. When it comes to product and services prices only 4.3% of CEOs anticipate a decrease this year. Meanwhile, 41% expect prices to remain the same as in 2018. More than half of CEOs expect to increase their prices in 2019. Knowing when to change price points needs to be based on monitoring of key performance indicators (KPIs) that are relevant to each company. While common metrics for monitoring growth include revenue and profitability, the KPIs need to be rooted in the business' growth strategy.

For the Future

The 2019 year is a year for being cautiously confident. Growth is possible if the tools used to achieve that growth include monitoring and being cautious about decisions. If you would like to see the full report on CEO projections for 2019 you can go here. If you would like a free consultation on how to prepare for a cautiously confident year you can contact us here.