Session 8: Key talent is a precious resource that needs to be protected and the impact on real estate.
The government has provided trillions in aid to combat the COVID-19 crisis. As a result of their efforts, we see unprecedented economic growth taking place in the U.S. However, this “overheated economy” will also bring inflationary pressure and different challenges once the boom fades.
The accelerated economic activity is leading businesses to see rising costs in raw materials, goods, and construction. It’s also creating wage pressure, as people relocate to new areas or seek new professional opportunities.
Businesses must be ready for the opportunities and challenges that unknown inflation may bring. They need to plan for effective capital deployment and react dynamically as activity unfolds to ensure their financial health.
Businesses can further prepare by understanding their needs and priorities, assessing customer behavior, and developing scenario planning for the next six months.
Key talent is a precious resource that needs to be protected.
Areas of particular importance continue to be labor and wages. Over the past 18 months, people have taken time out to reflect on their work-life balance and quality of life. With an overheated economy, more professional opportunities have opened up as well.
Loss of key talent disproportionately impacts small business owners compared to larger businesses. Now is the time to be proactive by reassessing compensation and work environments since key talent may become “curious” about other opportunities if their current employer hasn’t bolstered offerings or incentives. While these efforts may cost more now, they will ensure business continuity in the future and be a fraction of the cost compared to the risk of losing revenue or key talent. Small businesses may also struggle to find hires of similar quality or personality fit, and in the process, lose long-term business sustainability. It is important for small business owners to try to ease any anxiety or uncertainty employees are feeling.
On the other hand, there’s also a new openness that can be a benefit to small businesses. If they are in growth mode, small businesses have an opportunity to add key talent. Doubling down on current talent allows a small business to a be proactive in securing additional talent. Communicating the viability of a business is also critically important.
How the boom is impacting select segments.
Commercial real estate, particularly in select areas like New York City, are undergoing strain with rent renegotiation and delays in returning to the office. Small businesses should review their cost infrastructure and occupancy. Do small businesses need as big of a real estate footprint as before? Working remotely may lend to a more diverse geographic footprint.
Healthy balance sheets may also play a factor in real estate decisions and strategy as business owners consider financing needs and rethink workspaces.
Some businesses may want to expand their physical locations or space and are now facing a rise in construction costs and raw materials. However, this may only be temporary because businesses have been cautious with their rate of production and supply chain. Spending is more aggressive now and the supply chain is now trying to catch up with demand. If a small business has a plan, identifies market opportunities, and has a healthy balance sheet, securing low-cost financing to expand may now be optimal.
Small business shouldn’t be afraid. Given the continued economic growth, this is a good time to consider business expansion.