Empower Your Business: Interpret Economic Data Like a Pro

“Show Me the Data”?Ken Segal, Partner and Managing Director of LGA’s Business Advisory Services

Ever Wonder Why Your Coffee Costs $3.25? That price reflects a complex interplay of economic factors, including the cost of coffee beans, transportation, storage, wages, and overhead costs. Additionally, market demand, consumer preferences, and competitive pricing strategies all play a role. So, while seemingly simple, that cup of coffee encapsulates a web of global economic decisions from farm to table.

In our latest edition of Business Advisory Services Market Insight, we’re here to help you interpret the numbers, forecasts, and trends that matter most to your business, all with a sprinkle of cinematic flair. After all, as Ferris Bueller once said, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”

So, let’s take a moment to look around and see what the data is telling us, and how you can use it to make informed business decisions.

?● GDP Growth: "Show Me the Money!" – Jerry Maguire Gross Domestic Product (GDP) is the ultimate indicator of economic health. When GDP is growing, businesses typically see more demand for their products and services. Keep an eye on quarterly GDP reports to gauge economic momentum. If GDP is rising, consider ramping up production or expanding your services. Conversely, if GDP growth is sluggish, it might be time to tighten your budget.

● Inflation: "Houston, We Have a Problem" – Apollo 13 High inflation can erode purchasing power and increase operational expenses. Regularly monitor the Consumer Price Index (CPI) to stay ahead of inflation trends. If inflation is on the rise, review your pricing strategy and consider locking in prices with long-term supplier contracts.

● Unemployment Rates: "You Can't Handle the Truth!" – A Few Good Men Understanding unemployment rates can be tricky, but it’s crucial. Low unemployment generally means a healthy economy, but it can also signal a tight labor market, making it harder to hire. If unemployment is low, focus on employee retention strategies and competitive compensation packages. If it’s high, you might find a broader talent pool at more favorable rates.

??● Consumer Confidence: "The Force Will Be With You" – Star Wars Consumer confidence can be a guiding force for your business. High consumer confidence typically means people are more willing to spend money, which can boost your sales. Use consumer confidence indices to gauge market sentiment. When confidence is high, it’s an excellent time to launch new products or marketing campaigns. When it’s low, focus on value propositions and cost-saving measures.

?● Interest Rates: "May the Odds Be Ever in Your Favor" – The Hunger Games Interest rates can drastically affect your business. Lower interest rates make borrowing cheaper, which can spur investment and expansion. Higher rates, however, can increase the cost of loans. Keep an eye on the Federal Reserve's announcements. If rates are low, consider financing growth opportunities. If rates are high, prioritize paying down debt and managing cash flow efficiently.

?● Exchange Rates: "To Infinity and Beyond!" – Toy Story Fluctuating exchange rates impact import and export prices, ultimately impacting your bottom line. If you operate internationally, hedge against currency risk and diversify your market presence to balance out currency fluctuations.

● Housing Market: "There's No Place Like Home" – The Wizard of OZ The housing market can be a barometer for economic health. Rising home sales often indicate consumer confidence and economic stability. Monitor housing starts and sales data. A booming housing market can boost demand for home-related products and services, presenting new business opportunities.

Final Thoughts. Your business thrives on informed decisions, and understanding economic data is key. Stay vigilant, analyze the numbers, and use these insights to navigate the economic landscape.

With the right knowledge and strategy, you can shape your business's destiny. LGA’s Business Advisory Services team serves many clients in a host of sectors around the region, the country, and the globe. So what advice are we giving?

• Develop various forecasted scenarios to represent a host of outcomes in order to quantify how resilient or vulnerable your company may be to macro and micro economic data.
• Observe cost and consumption behavior all around you and let it become second nature to gain insight on where we are in a given economic cycle.
• Monitor key performance ratios so that you can proactively initiate discussions with your stakeholders should results either exceed or fall short of expectations.
• Evaluate all fixed and variable costs and determine which levers to pull should declining revenues or rising costs threaten viability.
• Familiarize yourself with loan document key terms, covenants, events of defaults, rights, and remedies.
• Create contingency plans to access alternative sources of lending should a new lender be immediately needed.

The good news is that you do not have to face economic uncertainty alone. We have advised hundreds of entities through several economic cycles. We take immense pride in empowering companies to proactively embrace and thrive during uncertain times. If you are interested in learning more about how you can prepare to fight for your company’s health, safety, and prosperity, reach out to the?LGA Business Advisory Team .

Until next time, may your profits be high and your stress levels low.

Thank you,

LGA BAS Team